High-end home rents falling
Demand for prime, high-end residential properties in Hong Kong is weakening, forcing landlords to lower their asking rents by as much as 20 per cent.
This comes as global financial institutions place their expansion plans on hold and reduce housing allowances for expatriate staff due to the world's grim economic outlook.
Property consultants say this trend could worsen in the second half of the year if the crisis shows no sign of improvement.
'Rents on homes leasing for more than HK$150,000 a month has become a disaster sector,' said Koh Keng-shing, managing director and founder of property consultancy Landscope Christie's International Real Estate.
As a growing number of investment banks had been scaling down their operations, it was getting hard to find alternative tenants able to afford such high rents, Koh said.
Landlords have consequently started cutting rents across the board. Rents for flats being leased at HK$100,000 to HK$200,000 a month and coming up for renewal have been lowered by about 10 per cent. And rents for flats being leased at HK$50,000 to HK$100,000 a month have been cut by 2 to 3 per cent.
'And if they want to secure a new tenant as quickly as possible landlords are offering even bigger cuts,' Koh said.
In its internal newsletter last week, Landscope Christie listed 14 homes, mostly in Mid-Levels, being offered for lease with rent cuts of 3 to 20 per cent.
The asking rent for a 3,071 sq ft apartment at Grand Bowen (on Bowen Road, Mid-Levels) has been cut to HK$100,000 from HK$125,000, according to Koh.
Another flat, 2,300 sq ft in size, at Villa Monte Rosa is being offered at a monthly rate of HK$83,000, down from its previous rent of HK$85,000.
Koh said landlords were becoming more willing to cut their asking rents after their properties were left unoccupied for four to six months. 'In a market boom new tenants would be instantly found after previous tenants left. But not in the present market,' he said.
Thomas Lam Ho-man, head of Greater China research at realtor Knight Frank, said the decline in the prime rental market followed a two-year rise in rents. 'When international corporates revise their housing packages, it is inevitable that the luxury leasing sector will be first affected,' he said.
Lam said many international firms had cut their demand for staff housing accommodation by at least 10 to 20 per cent due to the downturn of the financial markets.
'With smaller budgets, they have no choice but to relocate staff to less expensive areas or smaller apartments,' he said.
Some houses on The Peak which were commanding rents of as much as HK$500,000 had been left empty for several months, Lam said.
According to Colliers International, luxury residential rents in Island South fell 5.3 per cent to HK$45.40 per sq ft in the first quarter, while that for The Peak dropped 4.5 per cent to HK$63.73 per sq ft.
'Landlords, especially those with larger and more expensive premises, are more willing to give concession during the negotiation process,' Colliers said.
Yu Kam-hung, CB Richard Ellis's senior managing director of valuation and advisory services for Greater China, expects to see a general decline in residential rents in the second half of the year despite a rise in the number of leasing transactions. That is a traditional peak season for the leasing market.
'Housing budgets for some non-financial firms are even higher than that for financial institutions,' Yu said. 'But as to location, some newly-arrived expatriates from financial companies may choose to stay in West Kowloon at a lower rent rather than stay in the traditional luxury residential districts on the island,' he said.
The number of flats, out of 148, at Sino Land's high-end project Providence that were bought more than a week ago