Ten areas in Hong Kong where rents rose or fell the most this year, and why
With banks shedding staff and cutting housing budgets, flats became cheaper in places such as Quarry Bay, Central and Repulse Bay; Sham Shui Po, Tsuen Wan and trendy Tai Hang among places where rents rose
A big drop in rents in some Hong Kong neighbourhoods appears to be a further indication of the downturn in the city’s finance sector, and another possible sign that expats are on the move.
Data from online property listings firm Spacious shows the biggest fall in residential rents in the first half of 2016 was in Quarry Bay on Hong Kong Island, where rents dropped by an average of 13 per cent compared with the second half of 2015.
“The neighbourhoods showing the biggest drops have a few things in common. They are generally where finance professionals tend to live,” says Asif Ghafoor, founder and CEO of Spacious. “The number of people losing jobs and rental housing allowances in this industry in particular over the past 12 months is one possible reason for prices to be coming down.”
Other areas that saw a big fall in rents include Discovery Bay, down 11.8 per cent in the first half of 2016; Central, where they dropped 9.1 per cent; Repulse Bay, down 8.3 per cent; Sheung Wan, down 8.1 per cent; and the SoHo neighbourhood, where rents fell 7.8 per cent.
Reinsurance giant Munich Re announced last week that it was scaling back its Hong Kong office in favour of Beijing, within a regional restructuring that would include an expansion in Singapore.
It was also reported last week that Wall Street investment bank Goldman Sachs is laying off almost 30 per cent of its bankers in Asia, excluding Japan, particularly those working on mergers and acquisitions and equity and debt capital market deals. The bank, which has offices in the Cheung Kong Center in Central, has not confirmed the report. Analysts nevertheless say they expect other foreign investment banks to downsize in the city, in part as a result of competition from their Chinese counterparts.
“It’s been well documented that the economy of Hong Kong has been bad for the past 12 months and people have been losing jobs, so a general downward trend across the whole city is not surprising,” Ghafoor says.
Louis Chan Wing-kit, managing director of the residential department of Centaline Property Agency, says Hong Kong rents overall dropped between the end of 2015 and mid-2016, but had since risen. Areas such as Central, SoHo and Discovery Bay are very popular among foreign expatriates, so rents there are more easily affected by external factors, such as Brexit, he says.
“Mong Kok is an interesting one, which could possibly be explained by the commotion caused during Lunar New Year and people choosing to move to quieter neighbourhoods,” Ghafoor says.
Chaos erupted in Hong Kong’s busiest district on the first day of the Lunar New Year following a crackdown on illegal food hawkers, which led to protesters gathering to confront police.
Ghafoor believes the Spacious data is valuable because, although sales transaction data is available from the government, it does not collect statistics on rentals. The information is generally available only from agents on a voluntary basis.
“This clearly impacts the transparency of information in the market and makes the market less efficient,” he says. “We are working with agents and developers to put as many rental transactions as we can gather on a block chain, which everyone in the market can access. This will help bring transparency to the rental market.”
“North Point has seen the biggest increase in rental asking prices, which is not surprising as it’s probably the cheapest place to rent within a 20-minute commute of Central,” Ghafoor says, adding that it is traditionally a relatively cheap to live on Hong Kong Island. Tsuen Wan and Sham Shui Po were also low-cost areas and have excellent transport links, he adds.
“The area around School Street in particular has many fantastic eateries and has a great homely, neighbourhood feel about it. It’s also quiet and in general a very nice place to live. There are also many new residential developments in the areas, which are amongst the best in Hong Kong.”
According to Alex Yee Shun-lik, assistant district manager for North Point at Midland Realty, the overall rent rise in North Point could simply be due to the exceptional performance of several residential buildings, such as the The Pavilia Hill.
Sam See Wai-sum, a senior district manager at Midland Reality, says Tsuen Wan has relatively more old buildings and there have been very few new properties coming onto the market in recent years. As such there are not many units for rent, which would drive up prices.
“Tsuen Wan is a popular area, as residents have access to both the Tsuen Wan MTR station and the West Rail line, making it a very convenient location. And even though Tsuen Wan is in the New Territories, commuting to Kowloon is very easy and takes very little time,” See says.