New money climbs the Peak

HONG Kong’s luxury real estate market is hotter than even New York and London. Prices on the Peak, the top of Hong Kong island, are rising as China’s economic growth spawns a new generation of buyers keen to rub shoulders with western executives and the richest families.

Prices at the Peak start at HK$15m for a two-bedroom, 1200-square-foot apartment and exceed HK$200m for houses.

“The Peak used to be occupied by the Old Money of Hong Kong,” said Eddie Tam, a watch-seller’s son who spent more than $1m on renovating his 3581 square-foot home and filling it with antiques and works by artists such as Zhang Daqian, painter of the world’s most expensive Chinese picture. “I definitely belong to a new generation of owners.”

Stephen Chow, star of the “Kung Fu Hustle” movie, drew bids of up to HK$120m or a record $4171 a square foot last month for his four-storey Peak home, according to real estate brokers Knight Frank. London’s priciest homes sell for the equivalent of as much as $3673 a square foot, the company said.

A New York apartment facing the Hudson River goes for more than $2500 a square foot, according to Nicholas Brooke of Professional Property Services, a Hong Kong-based real estate adviser.

Demand this year surged for landed property on the Peak worth HK$40m or more, said Raymond Fung, a director at Knight Frank Hong Kong. “Single-house property is so popular because people with money want to live by themselves, preferably with no neighbours, and certainly not with the average folks.”

Hong Kong’s property prices have risen for more than a year as the economy expanded and the jobless rate fell to a four-year low, rebounding from a slump in 2003 caused by recession and the Severe Acute Respiratory Syndrome (Sars) virus epidemic.

“Property at the Peak has lifted off big time,” said KS Koh, MD of Landscope Realty. “Hong Kong’s economic revival has restored demand for luxury living, and the Peak is where Hong Kong’s rich and famous want to be.

“The Peak, which rises 554m above Hong Kong’s harbour, is often shrouded in fog in winter. In summer, its wooded slopes are cooler than the densely packed harbour-side suburbs, part of the reason it was chosen as the site of the summer residence for British governors in colonial times.

Average prices at the Peak doubled to HK$12600 a square foot in August from HK$6500 in mid-2003, according to Ben Ma, research manager at Knight Frank. Mass-market prices have risen more than 60% to about HK$4500 over the same period.

Prices in luxury neighbourhoods are rising faster than in the mass-market because rising interest rates are deterring some middle-class buyers, says Fung. HSBC Holdings, the city’s largest lender, increased its prime lending rate 25 basis points to 6,75% on August 11.

The rate was 5% at the beginning of 2005. “Mortgage rates aren’t a huge problem for those at the Peak,” says Fung. “Many of them pay cash.”

Eddie Tam owns a three-storey house with views of the city’s harbour from the top-floor master bedroom.

The former Merrill Lynch banker says his property has trebled in value since he bought it after Sars sent prices plunging. He declined to say how much he paid for it. Knight Frank’s Fung says Tam’s house is worth about HK$150m.

Actor and director Chow may have sold his house at 7 Pollock’s Path to move up the road to No10, a property called Skyhigh that commands 360-degree views from the top of the island, according to agents Knight Frank.

Limited supply, especially of landed property such as bungalows and townhouses, is driving price gains at the Peak, which has 546 stand-alone houses and 455 townhouses, according to Koh. This year, 40 apartments, 32 townhouses and three bungalows are for sale.

“Quality property at the top-end of the market is still pretty scarce,” says Tai Hui, an economist at Standard Chartered Bank. “The mass-market segment has a lot of unsold stock and faces competition from neighbouring Shenzhen.

“Bankers, children of billionaires and industrialists who made their fortune in China jostle for real estate at the Peak,” said Gareth Williams, a director at developer Wheelock Properties.

An increasing number of wealthy mainland Chinese are buying property at the Peak, though the number remains small, says Fung.

“Many Chinese fear a property at the Peak would be too conspicuous, and subject them to unwanted scrutiny,” he says.

Article by: Le-Min Lim -