Falling rents make upgrading easier for tenants
Falling rents are giving tenants a chance to upgrade at lower cost.
Research by Midland Realty shows average rents for private housing dropped 4.1 per cent from their peak in August last year to HK$20.09 per square foot in December. 'We found the number of flats in the 100 major housing estates released for leasing increased about 10 per cent in the second half of last year. That put residential rents under downward pressure,' Midland senior research manager Anita Cheung said.
Rents in the major housing estates that attract more investors, such as Taikoo Shing in Quarry Bay, South Horizons in Ap Lei Chau, Mei Foo Sun Chuen and the Sha Tin Centre, dropped the most. Data from Ricacorp Properties showed rents in these estates dropped by 6.7 to 9.2 per cent year on year in December.
Taikoo Shing recorded the sharpest fall last month as more vendors released their flats for leasing instead of selling. The average rent on the estate fell 9.2 per cent from HK$29.40 per square foot in November to HK$26.70 per square foot.
Ricacorp's head of research, Patrick Chow Moon-kit, said rents in Taikoo Shing used to be higher than those in nearby Nan Fung Sun Chuen, which are 34 to 35 years old but where the living environment is better. 'But recently we found that owners of some flats at Taikoo Shing were asking for only HK$25 per square foot.' Nan Fung Sun Chuen rents were still a minimum HK$26 per square foot, he said.
New projects also saw sharper falls in rents due to more flats being offered for lease.
Asking rents at Oceanaire, a new project by Cheung Kong in Ma On Shan, are only about HK$14 per square foot, lower than the HK$17.40 at 18-year-old Sunshine City nearby.
Data from Centaline Property Agency shows that 870 sq ft and 980 sq ft flats at City One Shatin are being advertised for HK$18,000 to HK$19,000 a month. But a 920 sq ft flat at phase two of Festival City, a new project in Tai Wai, is being offered at HK$13,800 to HK$14,000. A budget of HK$18,000 to HK$19,000 is now enough for a flat of 1,030 to 1,273 square feet at Festival City, which has a club house and better facilities.
'When a new project is ready to be occupied, a large number of units will be released for leasing,' Chow said. 'The vendors would be willing to cut their asking rents to attract tenants. The tenants will have more choices and stronger bargaining power.'
The increase in new flats for rent and on the secondary market drove the average rent on the major 50 housing estates monitored by Ricacorp down by 1.7 per cent to HK$21.78 per sq ft in December - the sharpest fall in a month since 2009.
'More vendors released their flats for leasing instead of selling as the property market was undergoing a consolidation period,' Chow said.
The supply of flats for lease is expected to increase this year, with the number of new flats scheduled for completion 11,000 to 13,000, up from 10,000 last year. The new projects include The Gloucester, phase three of Festival City in Tai Wai, Lions Rise in Wong Tai Sin, and Imperial Cullinan in Tai Kok Tsui.
'The supply in the secondary market will also increase as the property sales market will be inactive,' Chow said. 'As a result residential rents will drop further in the first quarter. But we believe rents will rebound in the second half after the stock has been leased during the peak season of leasing.'
The average amount by which Ricacorp's head of research, Patrick Chow Moon-kit, expects residential rents to drop this year