CHINA - A 40% year-on-year increase in the number of sale agreements in the Hong Kong property market last year suggests an upward trend will continue in 2007, according to a report published by Vigers.

The Hong Kong-based property consultants found growth in transactions across real estate sub-sectors as residential deals in May reached 11,110, worth HK38,187m (€3646.8m), with increased per capita income sustaining a strong buying sentiment.

In contrast, luxury residential sales showed a 25% month-on-month decline to 611 deals albeit demand created by the presence of foreign investors will result in a 4.8% increase in luxury rents.

Stable capital values and strong demand from the financial services sector will also continue to boost office, said the report.

In a second report on trends in the mainland Chinese property market over the past year, Vigers claimed recent government attempts to cool the property market has stabilised the rise in capital values to "sustainable levels".

In a section entitled ‘Market hot but not bubble’, the report argues overheated investment in the real estate market has created a "policy dilemma" for a government "wary of putting brakes on an industry that is considered [a] backbone industry".

Tightening measures are unlikely to create a hard landing for the sector, although the report forecasts increased volatility.

With strong interest from local investors, international investors "remains stable…Investors are actively pursuing a global development strategy and hunting for high returns and diversification in cross-border property deals", said Vigers.