Imagine prices of homes in Singapore’s Jurong catching up with those in Orchard Road.

Imagine prices of homes in Singapore’s Jurong catching up with those in Orchard Road.

Well, it has happened - in Hong Kong, that is, where demand for top-end homes on the outskirts has soared due to limited supply in the city centre. And some of these locations could be an hour’s drive away from downtown.

Prices of homes in the suburbs have seen a surge of as much as 10 per cent in the past year. The upward trend, especially for the high-end sector, is expected to continue through the year, industry players say.

Highlighting this trend, Ms Karen Choi, who heads research at property consultancy Vigers in Hong Kong, said that as of April, sales for homes worth HK$10 million (S$2 million) grew nearly 200 per cent over a 12-month period.

In contrast, the sale for homes in general grew about 40 per cent over the same 12-month period.

More interestingly, Ms Choi told The Straits Times, values of some upcoming top-end homes in countryside areas such as Sai Kung, Tai Po and Sheung Shui - typically bungalows or semi-detached houses with full sea views and designer fittings - are set to surge to as high as HK$20,000 per sq ft.

This was the cost of a new home in Hong Kong’s traditional luxury areas, such as the Peak and Repulse Bay, in 2005 when the city’s property market started recovering from the economically crippling Sars epidemic of 2003.

Homes in these luxury areas have now soared higher to exceed HK$25,000 per sq ft in average value.

‘But given that, going forward, there is limited supply coming into these traditional luxury areas, it is really not surprising that top-end homes in the outskirts have attracted big interest,’ said Ms Choi.

‘The demand for luxury properties is still quite prominent despite soaring capital values.

‘This sector is a lot more resilient than the mass market. For example, while prices of homes on average plunged by 60 per cent after Sars struck, those for top-end properties fell by a much lower 20 per cent.’

A lot of high-end buyers at Tai Po and Sheung Shui, near mainland China, are Hong Kong or mainland industrialists who own factories or investments in neighbouring Shenzhen city across the border, Ms Choi noted.

‘Increasingly, however, I do see more top- level executives who work downtown coming out to either rent or buy in these areas.’

Boosted by a sustained economic recovery and healthy stock market, the luxury property sector has boomed over the past year.

March saw the sale of the most expensive home ever - a house in the Peak district which cost HK$38,500 per sq ft - and the most expensive apartment unit, at HK$32,000 per sq ft.

It is not expected to stop there, with one of Hong Kong’s leading developers, Sun Hung Kai Properties, having forked out last December HK$1.8 billion - a record HK$42,196 per sq ft - for a plot of land at the Peak.

This means that prices of new homes there will have to be set above current records, possibly as high as HK$60,000 per sq ft, analysts say.

Sun Hung Kai is also co-developer of the luxury Orchard Turn condominium in Singapore, which holds the city state’s record home price of S$4,000 per sq ft.

The phenomenon of expensive homes in the suburbs underlines the depth of Hong Kong’s property market, experts noted, compared to places like Singapore.

While the price of the costliest home in Tai Po will still be enough to buy a home in the heart of town, they said, the costliest one in Jurong - at about S$500 to S$600 per sq ft - is no match for even the cheapest Orchard Road flat.

‘Even in top Singapore suburbs like Tanah Merah, the top price ranges at just over S$600 psf,’ Mr Michael Ng, managing director of Savills Singapore, told The Straits Times.

‘This is nothing compared to at least S$1,000 psf for homes in Orchard Road and the prime districts, if these are available now in the resale market.

‘It will still take a while for the Singapore property market to catch up with the Hong Kong one, if at all.’

Source: The Straits Times, 28 May 2007