After a flurry of buying sprees in the first quarter of this year, backed by pent-up demand, sales have significantly slowed recently. But leasing transactions remain brisk as more people turn to the rental market.
According to Midland Realty, average private residential rents across Hong Kong picked up about 5.3 per cent in the first five months, on increased demand, to a monthly average of HK$21.15 per square foot, surpassing the peak levels achieved in 1997.
Gary Yeung, director for Hong Kong Island at Midland Realty, says residential rentals have increased steadily over the past few months and he expects to see further growth, though its pace may be slower in the coming months.
“There is strong demand for luxury homes in popular locations such as The Peak, Island South and the Mid-Levels. Larger units, such as four-bedroom apartments, are especially in demand, but supply is very tight,” he says. “In Kowloon, we see more residential supply available in the market, so the upward pressure on rentals is not so strong.” Yeung says the luxury leasing market has been active, with properties in the rental bracket of HK$80,000 to HK$150,000 a month particularly sought after by
tenants such as expatriate executives and senior corporate management.
With uncertainty over housing policies under the new government headed by Chief Executive Leung Chun-ying, and the continued woes of the global economy and the euro-zone debt crisis, Hong Kong’s residential market appears to be at a crossroads. Some home-seekers have decided to postpone their purchase plans and switched to the leasing market for fear of any unexpected downturn.
Clara Chu, director of residential leasing at Colliers International Hong Kong, says global market uncertainties have made people more cautious about the future, dampening the home sales market, while business organisations tend to be more cost-sensitive.
“The leasing market is relatively stable, with a lot of lease transactions and movements. We continue to see leasing demand in Island South and other traditional districts,” she says. “On The Peak, the stock of leasing properties available is rather small and lease transaction volume is low. As a result, luxury rents are still stable there.”
She says there are mixed feelings in the market. Some landlords are being more flexible with their asking rents as they seek to entice tenants. But there are still some cash-rich landlords keeping their rents firm and they are willing to take the risk of leaving their properties vacant for some time before picking up the right tenants.
According to property consultant Knight Frank, net effective monthly rents of luxury homes on The Peak were at HK$61.8 per square foot as of May, while those in Mid-Levels and Pok Fu Lam were at HK$43.1 and HK$30.8 respectively. Luxury rents in Jardine’s Lookout and Happy Valley were estimated at HK$40.6 and those in Island South at HK$44.3.
Some major leasing transactions were recorded by agents in May, including a 3,200 sq ft house at Strawberry Hill on The Peak, leased at a monthly rental of HK$250,000; a house at Villa Rosa in Island South rented at HK$230,000; and a 2,348 sq ft apartment at Seymour in Mid-Levels West leased at
HK$125,000.
Although leasing activities remain stable in line with the trend of more people turning to rent, a general cutback in corporate housing budgets is casting a doubt on rental demand.
Gary Fu, assistant branch manager for Mid-Levels West at Professional Properties, says the luxury leasing market has been stable and healthy. The leasing movements have been stimulated further by luxury property redevelopment plans. As Wheelock Properties is redeveloping its luxury properties on The Peak, for example, some affected tenants are fleeing to other districts such as Island South and Mid-Levels to find suitable accommodation.
“We have seen manpower lay-offs in the business community. At the same time, some business organisations are hiring new staff, while investment banks are bringing in expatriate executives to Hong Kong from other regional offices to support business growth here,” Fu says.
“Some expatriates are leaving Hong Kong, but we see the arrival of others. The new arrivals will add demand to the residential leasing market, though many of them are looking for properties with a smaller housing budget than before.”
Fu says demand for luxury homes in Mid-Levels West is strong among newly-arrived expatriates. Some landlords seem eager to get tenants to keep their properties occupied.
Others are willing to rent out properties at a discount, while others are offering a higher commission, up to a month’s rental or more, to property agents striking lease deals for them.
