Residential capital values rose 1.8% quarter on quarter in the last three months of 2010 in luxury residential markets in Asia, a new report reveals.

However, price growth has slowed steadily from the 7.4% quarter on quarter pace recorded in the third quarter of 2009, as sales activity cooled after a string of anti speculative measures implemented in 2010 by various governments, the report from property consultants Jones Lang LaSalle shows.

Of the eight featured luxury residential markets, five saw an increase in capital values during the quarter, while capital values remained stable in two cities and declined in Beijing. This compares with the previous quarter when five markets recorded an increase in capital values and the remainder saw stable prices.

Despite the latest round of government measures aimed at curbing speculative demand, luxury residential prices in Hong Kong grew by 6.4% quarter on quarter in the last quarter of 2010 due to continuing rental growth and tight supply. On the other hand, prices in Singapore’s luxury prime market remained stable for the second consecutive quarter as buyers remained cautious after recent government tightening measures.

In the China Tier I markets, sales activity remained quiet throughout the fourth quarter due to greater restrictions on mortgage loans for investors and other policy tightening, while developers had little incentive to lower prices.

Capital values of luxury apartments rose marginally by 0.3% quarter on quarter in Shanghai but fell by 5.4% quarter on quarter in Beijing.

Luxury residential prices are generally likely to remain stable or see slower growth for 2011 as buyers have become more cautious about further tightening measures by governments, the report says.

At the same time, downward pressure on prices is likely to be limited, supported by rising rental levels and low holding costs. However, 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.

‘Government policy has become progressively tighter in China’s Tier 1 cities in an effort to cool the residential markets. It’s interesting to see the price trends across Asia Pacific are largely similar in direction to China, if not as dramatic in magnitude,’ said KK Fung, managing director, Jones Lang LaSalle Greater China.

‘While the Hong Kong government has also been proactive in avoiding an asset bubble by placing more restrictions onto the residential sales market in the last few quarters, the city’s luxury residential properties continued to lead capital value growth across Asia Pacific through 2010, suggesting the strong underlying investment demand and market optimism there,’ he added.

According to Chris Fossick, managing director, Jones Lang LaSalle, Singapore and South East Asia the Singapore mass residential market increased 12% in 2010 driven by positive sentiment on the back of strong economic performance, population growth and improved affordability as people earn more money and finance...