Patrick O'Neill and his wife quickly discovered the realities of Hong Kong's overheated property market when they started shopping for an apartment a few weeks ago.
Every time they found an apartment in their price range, about HK$20 million (Dh9.4m), it had already been sold.
The search has been "pretty crazy", says Mr O'Neill, an American who runs a property company. "It just seems like everyone keeps buying. It reminds me of the US markets in 2006."
While other markets around the world struggle, Asian governments are worried about the potential for property bubbles bursting around the region. Prices continue to soar, defying the global downturn.
Average home values in Hong Kong jumped 19.8 per cent last year over 2009, with prices in most high-end neighbourhoods up more than 40 per cent since January 2009, according to the property company Jones Lang LaSalle. Average prices are ranging from HK$10,520 a square foot to HK$29,313 a sq ft in the most expensive neighbourhoods, says Colliers International, a property brokerage.
But the increases are not limited to Hong Kong. Prices in Singapore jumped 13.6 per cent and Beijing prices were up 18.6 per cent last year compared with 2009, says Jones Lang LaSalle. Malaysia and Indonesia are also attracting new investors. Residential prices in Kuala Lumpur climbed 13.4 per cent last year on the year before. Markets have been fuelled by the combination of low supply of property and readily available capital.
"We are awash with cash," says Alan Child, the executive chairman of Knight Frank Petty, a global estate agent. "There is a lot of liquidity in the market." About 30 per cent of the buyers in Hong Kong are from mainland China, Mr Child says.
The mainland Chinese are buying property in the city as a way to move cash abroad, using corporations and offshore banks to bypass official limits on the transfer of funds, analysts say. Most activity has been at the luxury end of the market. On Victoria Peak, Hong Kong's most exclusive neighbourhood, estates were selling for HK$25,000 a sq ft two years ago. Now similar properties are selling for HK$42,000, Mr Child says.
Government bodies in Hong Kong, Singapore and China have tried to slow the markets, including by introducing new taxes, making it more difficult to get mortgages and limiting the number of homes that one person can purchase.
But the initiatives have had little effect on prices. In Hong Kong, the number of transactions dropped 11 per cent after the latest measures were announced in November, according to Jones Lang LaSalle, but prices still rose 2.6 per cent.
The Hong Kong government's actions included a new stamp duty and requiring buyers to pay more cash up front for property.
"It's too soon to call if the government measures will have an impact," says Dr Chua Yang Liang, the head of research in South East Asia for Jones Lang LaSalle.
The effectiveness of the government measures is a hot topic of debate within the property industry.
Tighter regulations have had "absolutely zero" impact, according to David Faulkner, the regional director of Colliers International and a member of the Royal Institution of Chartered Surveyors' Asian board of directors. "It's like trying to push mud up the hill," he says.
In Singapore, the government has helped ease the frenzy for apartments by encouraging more development, a move Hong Kong is following. The administration in Hong Kong recently announced plans to sell 71 land parcels for development, including 52 residential sites.
"Selling land will send the right message to the market," Mr Faulkner says. New developments could be ready for sale in 18 months, but that will not change the market in the short term. "The psychological impact would be key at the moment," Mr Faulkner says.
Lending restrictions and an interest rate rise might also slow sales. "That may be a catalyst for price adjustment," Mr Child says.
In the short term, analysts expect more of the same. Colliers International expects luxury residential prices in Hong Kong to rise 8 per cent this year. Rental rates in Hong Kong, a key variable for investors, are predicted to climb 10 per cent this year, Colliers says.
But the market is gradually changing in most other Asian cities with prices slowing. Speculators are backing away from the market, fearing the bubble is about to burst.
"The tightened lending rules [in Hong Kong] will enable the local market to function properly in response to genuine end-user demand," Colliers predicts.
New projects will help to stabilise the market, analysts say. "We should see a larger supply by 2013," Mr Chua says.
Mr O'Neill, meanwhile, has grown frustrated with the situation in Hong Kong and has put off buying. "We are growing somewhat leery of the ability of the markets to continue to produce price appreciation," he says.
