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Chinese cash inflates Hong Kong property prices

View from above: Hong Kong Island, as seen from Victoria Peak, where real estate prices have been soaring.
View from above: Hong Kong Island, as seen from Victoria Peak, where real estate prices have been soaring.
STORY HIGHLIGHTS
  • An apartment in Hong Kong recently sold for a record $57 million
  • Analyst: Mainland investors buying in HK to diversify investments
  • Hang Seng stock exchange up 50 percent this year; expected to rise 20 percent next

Hong Kong, China (CNN) -- The most coveted property on Hong Kong island is called "The Peak," overlooking the city's stunning Victoria Harbor.

But these days, the prices are what is taking people's breath away -- a modest apartment here now can go for $30 million. Recently what is claimed to be the world's most expensive apartment -- a 6,200-square-foot duplex -- sold for a record $57 million.

While an implosion of property prices sparked the financial crisis in the United States, property prices in Hong Kong are booming in part because of mainland cash pouring into the city.

China's superrich are purchasing homes and sweeping luxury brand items off the shelf here.

Video: Spending big in Hong Kong
Video: Hot money floods Hong Kong
RELATED TOPICS
  • China
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"There would be no good turnover of luxury brands in Hong Kong if it wasn't for the Chinese shopper," said Francis Guten, a luxury brand consultant in Hong Kong.

Although total retail sales have dropped 4 percent this year, luxury brands are doing brisk business thanks to mainland shoppers.

"They come to Hong Kong because Hong Kong was always the first window on the world for luxury goods for the Chinese," Guten said, adding that the purchase of "genuine" luxury goods -- rather than the fakes that proliferate the mainland -- is actually cheaper in Hong Kong because of lack of sales taxes or tariffs.

And how are they purchasing these goods? "With cash," Guten said. "Because they have the cash."

The real estate boom by mainlanders is a way for China's rich to diversify their investments close to home.

"If you look at the history of China, despite the fact that the economy is very strong on a global basis right now, there's been a very volatile period," said Francis Cheung of CLSA. "(If) you have 100-percent wealth in China, you just naturally want to diversify."

They are not only buying property and Gucci bags, but stock -- the Hang Seng stock exchange is up 50 percent this year. Research firm CLSA expects the market to rise another 20 percent in 2010.

CNN's Andrew Stevens and Eunice Yoon contributed to this report.