Luxury rents set to strengthen
Modest growth in the investment potential for luxury homes is expected over the next several months as landlords become firmer about rents and as the supply decreases, estate agents say.
Agents said luxury rents in the first quarter did not grow as fast as capital values, although transactions were up significantly.
Vincent Chan Kwan-hing, deputy sales manager of Midland Realty's residential department on Hong Kong island district, said capital values in luxury apartments were up 10 to 15 per cent in the past few months, against a 5 to 10 per cent rise in the overall luxury rental market.
The gap in the pace of growth between the two sectors has significantly cut the yield returns of luxury apartments.
Mr Chan said landlords would ask for higher rental prices for better investment returns.
The growth potential in the luxury rental market is also a reflection of the decreasing supply.
Chesterton Petty said leasing activity increased in the luxury sector this year, with the lure of such carrots as flexible lease terms and lower rental prices.
The high take-up rate over the past five few months cut the existing supply of luxury apartments available on the market.
Chesterton Petty expected rentals in the mid-range, from $30,000 to below $100,000, would stay firm, with some increasing gradually over the next few months.
Growth potential for rentals at the high end would be lower.
According to property consultants, properties in the $30,000 to $60,000 range were the most active and rents in some developments even edged up in the first quarter.
But Chesterton Petty said there remained an oversupply of properties with rents above $100,000 per month in the first quarter and landlords were willing to be flexible.
