2007 has started with a buoyant note in the back drop of strong local economy, high-flying stock market and a tight luxury property market. With more people joining the ranks of billionaires, demand for super luxury properties is reaching an all time high.

Despite the lacklustre sales in the mass property market, the high end market blossomed with more significant sales. On the heels of house transactions in Stanley and Tai Tam, other areas were picking up, 1 Shouson Hill Road East had witnessed the bulk sale of 6 houses to a local veteran investor for $280 million. Wheelock Properties’ 3-5 Gough Hill Path on the Peak had its second large house sold for over $220 million and eight houses were reportedly sold at Sun Hung Kai Properties’ Severn 8 in the same neighbourhood, all setting record prices for similar properties.

The stock market frenzy continued and pushed the Hang Seng Index to historical high. The capital-driven rally seems to have gathered huge momentum, inundating the stock market with cash. This has depressed the inter-bank lending rate to low levels, and banks are awash with surplus capital. The HSBC group has therefore slashed its prime lending rate, and other banks quickly follow suit.

As we expected, the high end sales market saw more activities and among them, some were sizeable transactions. The rate fear subsided and buyers were lured back into the luxury property market on the back of a robust stock market.

Economic figures have firmed up confidence that rate rise has come to a stop. The threat of a continued rate hike subsided. In Hong Kong. international hot money continued to pour in, leading to a low Hibor, Loan demand remained low. Some banks are now considering lowering their prime rates to fall in line with the HSBC group.