Pay cuts for foreign bankers slow luxury-home rent rises in Hong Kong

Rise in cost of luxury flats slows in Hong Kong. In contrast, rents for prime housing in Beijing, Shanghai and Guangzhou surged last year

PUBLISHED : Thursday, 04 April, 2013, 12:00am
UPDATED : Thursday, 04 April, 2013, 4:03am

Rents for luxury homes in Beijing, Shanghai and Guangzhou grew faster last year than those in Hong Kong, where demand was affected by cuts in allowances for expatriate staff in the financial industry, property consultants say.

While the city's property prices are the world's highest, the rate of increase in rents for its luxury homes ranked fourth among Asian cities, Knight Frank's prime global rental index shows.

Hong Kong - ranked No 9 worldwide - posted a 3.7 per cent year-on-year increase in luxury rents last year. Beijing saw the highest average increase in Asia - 8.5 per cent - followed by Shanghai (6.1 per cent) and Guangzhou (4.7 per cent).

The international property consultancy publishes a rental index for luxury homes in 16 cities around the world.

Prime rents rose the most in Nairobi, Kenya, last year, with a 17.8 per cent increase, followed by Dubai, where they rose 14.3 per cent, and Beijing, Knight Frank said.

Patrick Chow, head of research at Ricacorp Properties, said: "Constrained housing allowances for expatriate staff and a downsizing of the operations of Hong Kong's financial institutions have weakened demand for luxury flats in particular."

With smaller budgets, he said, expatriates were forced to look for smaller apartments, thereby boosting rents for mass and mid-range housing.

Chow said rents jumped 16.8 per cent in the low-end to mid-range market last year.

Savills said townhouse rents consolidated from October to December, dropping 1.4 per cent on average.

The demand for HK$100,000-per-month homes has dropped, causing a further softening in rents over the past four quarters

"The demand for HK$100,000-per-month homes has dropped, causing a further softening in rents over the past four quarters."

But townhouse rents seemed to be falling more slowly, Savills said.

In the traditionally quiet fourth quarter, initial public offering activity in the stock market was very sluggish, leading to headcount losses among financial services firms, it said.

Looking ahead, Savills believes a revival in the number of companies seeking stock market listings - which is good business for financial firms - coupled with limited new supply of luxury housing will keep rents high.

If the global economy made a steady recovery, rents for luxury flats would probably rise around 5 per cent this year, Savills said.

International property consultancy CB Richard Ellis said average rents for serviced apartments in Beijing increased 2.9 per cent quarter on quarter to 205.20 yuan (HK$257) per square metre per month, while average rents for luxury apartments grew 1.1 per cent to 124.90 yuan per square metre per month.