• Luxury rents fell but vacancy rates remain low
• Both locals and mainlanders dominate the luxury residential leasing market
• A higher FIREBS unemployment rate led to a fall in serviced apartment rents and occupancy rates
Hong Kong – 10 Jul 2019 Prominent real estate advisor Savills saw the luxury residential leasing market lost momentum in Q2 with rents across all districts posting marginal declines as financial services demand weakened. However, rents in the townhouse market are still supported by limited availability. Expats are a diminishing force, and the market is now dominated by both locals and mainlanders.
On Hong Kong Island, where luxury apartment rents fell by 1.0% QoQ, ended the nine consecutive quarters of growth from Q1/2017. More precisely, all its sub-markets experienced rental falls over the period, with Pokfulam (-1.8%) recording the greatest rental fall, followed by The Peak (-1.1%), Mid-Levels (-0.8%), Happy Valley / Jardines’ Lookout (-0.6%) and Southside / Shouson Hill (-0.4%). Despite slipping luxury rents, vacancy rates remained low.
Despite luring increasing numbers of expats from their traditional haunts on Hong Kong Island, rents in Kowloon and the New Territories were down by 0.8% and 2.5% respectively over Q2. Rents in Tsim Sha Tsui / Hung Hom and Ho Man Tin / Kowloon Tong dropped mildly by 0.9% and 0.3% respectively. Discovery Bay recorded the largest rental decline in the New Territories (-3.6%), while Sai Kung and Shatin / Tai Po were down by 2.4% and 1.3% respectively.
The townhouse market quietened down after a robust Q1, with rents posting a mild drop of 0.5% in Q2, while rents on the Peak remained unchanged.
Serviced apartments saw falls in both rents (-2.2%) and occupancy rates, which is likely to have been caused by a rise in the FIREBS unemployment rate (from 2.1% in March to 2.4% in May).
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “The cost of living in Hong Kong is well ahead of its Asian peers and is causing expats to consider cheaper alternatives . But on the plus side Hong Kong’s tax system is advantageous in attracting expatriates and businesses and the city was also ranked top in the index of Economic Freedom 2018, which covers such areas as the rule of law, government size as well as financial and business freedom.”
Ms. Edina Wong, Senior Director, Residential Services said: “In Q2, leasing activity for units above HK$100,000 pm was subdued but between HK$70,000 and HK$100,000 we are seeing a lot more interest from mainland Chinese and locals. In Kowloon, the first deal in K11 ARTUS in Victoria Dockside (1,284 sf 2-bedroom unit was leased for HK$145,000 per month or HK$113 per sf in May) set a new record for per square foot rents in the Kowloon residential market.”