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Capital values rise 1.8% across Asia’s luxury residential markets

SINGAPORE, 6th May 2011 - Average capital values rose 1.8% q-o-q in 1Q11 across monitored luxury residential markets in Asia, largely similar to the previous quarter according to the recent Residential Index from Jones Lang LaSalle’s research team. However, price growth has slowed steadily from the 7.4% q-o-q pace recorded in 3Q09, as sales activity has cooled after the string of anti-speculative measures implemented from 2010 onwards by various governments.

Of the 8 featured luxury residential markets, 5 saw an increase in capital values during the quarter, while prices remained stable in two cities and declined in Kuala Lumpur. This result was similar to the previous quarter. Despite the latest round of government measures aimed at curbing speculative demand, luxury residential prices in Hong Kong grew strongly by 8.3% q-o-q in 1Q11, due to the sustained low holding costs and tight supply. On the other hand, prices in Singapore’s luxury prime market remained stable for the third consecutive quarter as buyers remained cautious after recent government tightening measures.

In the China Tier I markets, sales activity remained quiet throughout 1Q11 following the pilot property tax as well as the ban on buyers already owning two apartments from buying additional units. However, prices remained largely stable or on the rise. Capital values of luxury apartments rose marginally by 0.4% q-o-q in Shanghai but by a stronger 3.2% q-o-q in Beijing.

“The growing pool of high net-worth individuals from mainland China will not only lead to a structural change in buyers’ profile in Hong Kong’s luxury residential market, but will also gradually raise demand for high-quality residential properties in other Asian cities, where the investment environment and social infrastructure are good” says Joseph Tsang, Managing Director and Head of Capital Markets, Hong Kong.

Luxury residential prices are generally likely to remain stable or see slower growth in 2011 due to on-going policy and interest rate risks. Prices in China are expected to either remain flat or edge down slightly over this year as developers will likely introduce more price discounts and launch less high-priced units over the next 12 months. The luxury markets in Hong Kong and Singapore should retain some price momentum due to strong end-user demand and with long-term investors continuing to be attracted by the current low holding costs and the potential hedge against inflation.