Luxury homes to see slower rent growth
Sluggish global economy dampening demand for high-end flats while fuelling strong growth for mass-market units, says consultancy
Rents for luxury homes in Hong Kong may rise just 2 per cent this year, but those for mass-market flats could jump as much as 10 per cent, Jones Lang LaSalle said.
The property consultancy found rents for luxury homes continued to drop in the first quarter as a sluggish global economy dampened demand.
The firm had revised its full-year estimate for growth in rents of luxury flats to 2 per cent from 4 per cent, said Denis Ma On-ping, its director of research for the greater Pearl River delta region.
However, the firm expects rents for mass-market flats to grow between 5 per cent and 10 per cent.
"We thought the market would be more stable in the first quarter, but luxury residential flat rents dropped 1.2 per cent [quarter on quarter] during the period," Ma said. "The banking and finance sector is not [doing very well], so the demand for high-end luxury flats is not strong."
Expatriates' housing allowances had been cut because of the sluggish European and US economies and corporate restructuring, he said.
The firm found that rents for luxury homes on Hong Kong Island fell 1.4 per cent in the first quarter, with the Mid-Levels and Island South recording the largest drop of 1.5 per cent, to HK$40.50 and HK$40.90 per square foot per month, respectively.
Rents for serviced apartments declined 0.3 per cent to HK$62.70 per square foot per month.
Leasing demand from the financial services sector softened, partly because of a 25 per cent drop in the number of families with breadwinners in the sector moving to Hong Kong last year, Jones Lang said.
The mass residential market recorded strong growth in rents in the quarter, which jumped to HK$23.10 from HK$18.40 per square foot, the firm said.
Jones Lang said many people were downgrading to cheaper flats, with some corporate executives moving from high-end to mid-luxury premises with monthly rents in the HK$50,000-HK$100,000 range.
"We have yet to see a strong recovery in the second quarter, because some landlords are bearish, saying some of their tenants end their leases instantly and do not even want to negotiate the rent," Ma said.
"But we expect the luxury rental market to bottom out in the second half of this year because the economic outlook for Hong Kong should be better, with GDP growth close to 4 per cent this year. If the economy picks up, rents should follow."
The firm said the leasing market had benefited from the government's latest cooling measures, as buying luxury properties had become more costly for non-local residents and companies because of the new buyer's stamp duty.
