After rising steeply for the past two years, rents for prestigious residential properties in Hong Kong are tumbling, with landlords scrambling to grab good tenants as international investment banks lay off expatriates or cut their housing allowances. Property consultants expect rents for luxury accommodation, which were at record levels earlier in the year, to drop by 15 per cent in the fourth quarter of this year and fall a further 25 per cent next year. 'The top-end luxury segment may even fall a bit deeper,' said Anne-Marie Sage, regional director of residential at international property consultant Jones Lang LaSalle. She said flats costing HK$200,000 a month or more, usually rented to top management or regional heads of financial institutions, would be hit particularly hard. Those at HK$80,000 to HK$150,000, usually in Mid-Levels and catering to middle or senior management, would also suffer. 'We have not seen any major cut at this point, as housing allowances are usually adjusted at the beginning of the year. But we will see this happen next year,' she said. Faced with expected rising vacancies in luxury homes, landlords have become very flexible in clinching deals to keep good tenants. Ms Sage cited a tenant who signed up to pay HK$145,000 for a 3,000 sq ft flat two years ago - a period during which luxury rents rose 25 per cent - who had just renewed for HK$132,000 a month. A Mid-Levels flat with an asking rent of HK$110,000 had been let for HK$80,000. Low-end luxury flats with rents ranging from HK$20,000 to HK$60,000 would be less affected. Colliers International said luxury rents had risen from HK$22 a square foot during the outbreak of severe acute respiratory syndrome in June 2003 to a record HK$46.20 in August this year, before falling back to HK$39.50 last month. Polly Ng, director of CB Richard Ellis residential, said this was because landlords had cut rents by 15 to 20 per cent after the collapse of Lehman Brothers. Large developers such as Sun Hung Kai Properties, Nan Fung Development and Kerry Properties had cut their rents to lure tenants. 'The market was very quiet in September and October but activity picked up last month after landlords cut rents,' said Ms Ng. She said a 4,200 sq ft flat in Mount Kellett Road on The Peak had been offered for months at an asking price of HK$200,000, excluding management fees and rates. Recently, it was leased at a rent of HK$140,000. Ms Ng said a 4,212 sq ft house at Regalia Bay on the south side of Hong Kong Island was recently leased at HK$140,000 a month. 'Before the crisis, the average rent for this kind of house was around HK$180,000 to HK$190,000 a month.' Koh Keng-shing, an executive director at Landscope Surveyors, said: 'Quite a number of houses on The Peak going for above HK$200,000 a month are empty.' Edina Wong, a senior director of Savills residential leasing, said: 'The layoffs and the cuts in housing budgets will hit demand and ability to pay.' Ms Wong said she expected major landlords to cut rents by 20 per cent next year.