Bad news for Hong Kong landlords as Covid-19 pressures housing rents to multi-month lows
- Housing rents have slipped in recent months in indices tracked by Midland Realty and Centaline Property Agency as the fifth wave of Covid-19 worsens
- South Horizons, Smithfield Terrace and Shatin Centre are among the worst hit in rentals, while supply from new projects is set to weaken the market
Average rent in the city fell 0.7 per cent to HK$34.74 per square foot in January, the lowest level since May 2021, according to data compiled by Midland Realty, based on leases in 138 housing estates. Rents have weakened by a cumulative 2.3 per cent in a four-month slide, the longest since a six-month streak ended in February 2021.
“We have also seen many listings, so the rents will still be under pressure in February and March,” said Sammy Po, who oversees the residential markets in Hong Kong and Macau at Midland Realty. “There may be some bargain rental listings now.”
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The latest outbreaks could not have come at a worse time as Financial Secretary Paul Chan Mo-po gets ready to deliver his final budget and views on the local economy on February 23. The government will cap public and private gatherings from February 24, while shopping malls and supermarkets will only serve vaccinated customers.
Cracks in the rental market are also seen in the biggest drop in 12 months in a gauge compiled by local competitor Centaline Property Agency. Its Centa-City Rental Index, which tracks deals in 133 estates, fell 1.4 per cent in January to a seven-month low. The index has declined 2.4 per cent over three months.
Average rents could fall by 1 per cent in the first quarter, and 1.7 per cent in the second quarter, said Wong Leung-sing, senior associate director of research at Centaline, after recent notable pullback in several locations.
South Horizons saw a flat measuring 521 sq ft being leased at just HK$14,200 a month last week, according to Centaline. At HK$27.30 per square foot, rents have reached the lowest in two years in the area.
Smithfield Terrace in Kennedy Town experienced the biggest drop in January as rents sank 15 per cent to HK$44.87 per square foot, according to Centaline, while Shatin Centre saw a 10.2 per cent slide to HK$40.47 per square foot.
The declines can be attributed to the mainland students and foreign expats leaving Hong Kong amid the fifth wave, Wong said, noting the absence of new incoming demand from mainland students or expatriates.
Apart from the pandemic, the market is also suffering from a fresh supply of flats from new projects, said Buggle Lau, chief analyst at Midland Realty. Some desperation may have set in as the city recorded a 46 per cent jump in new completions last quarter to 3,200 units, he added.
One flat measuring 200 sq ft at Aquila Square Mile was last week pre-leased at HK$9,800 a month before the project was completed, as the owner was worried about a surge in listings, according to Midland. Units in earlier phases of the project recently fetched between HK$11,000 and HK$12,000, records showed.
Spoilt for choices, some tenants are delaying plans to move to wait for cheaper rents, said Kelvin Cheong, chief operations officer of Midland Realty. Others are switching to bigger homes like villas, or to areas with lower density, as they become more affordable, he added.
