Tuesday, November 26, 2013

The Peak of Hong Kong Property

Hong Kong’s Opus: a case of twisted loftiness?

When the smart money gets out of the market, who should be going in? That question will be on many real estate buyers’ minds when they consider the current state of the top end of the Hong Kong residential market. And lofty it is. As detailed in this SCMP article on Peak homes sold, a house on Barker Road in HK’s Peak district has just sold for $69 million. At 5,700 square feet, that works out to a whopping $12,000 per square foot. This latest deal follows on the back of another sale last week of a 6,800 square foot house on the same street that sold for $95 million, or $14,000 per square foot. This earlier deal represented the third most expensive home ever sold in Hong Kong.
This flurry of activity at the nose-bleed end of the the market is likely to encourage over ultra-premium property holders to sell. An apartment unit at the Frank Gehry-designed Opus could sell for over $60 million, or $11,000 per square foot, which would make it the most expensive flat in Hong Kong, and perhaps all of Asia.
These numbers are particularly extraordinary considering the restrictions that the Hong Kong government has been imposing to cool the wok-hot market. Mortgages are limited to 40% of appraised value, and transaction stamp duties for luxury dwellings range from 4.25% for primary residences to 8.5% for secondary residences. For the Opus apartment alone, the stamp duty would represent either $2.56 million or $5.12 million, depending upon first or second home status. Those additional costs alone would buy a palatial home in other most places in the world.
Buy or sell? When it comes to real estate, it’s always safer to follow the smart local money.

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