Home rents in Hong Kong climb to 18-month high as students and professionals return while interest rates deter buyers

Rents increased 1.15 per cent in July, according to Centaline’s Centa-City Rental Index, which tracks 138 housing estates across the city
The index could climb by another 1.74 per cent in the third quarter to a level not seen since October 2021, Centaline says

Hong Kong property

Martin Choi,Peggy SitoandJulia Zhong

Published: 8:30am, 11 Aug 2023

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Home rents in Hong Kong climbed to an 18-month high in July as the city’s private housing market entered its peak season, as students and working professionals returned to the city and high interest rates continued to deter renters from becoming buyers.

Rents increased 1.15 per cent in July to 114.02 from a month earlier, according to the Centa-City Rental Index compiled by Centaline Property, which tracks 138 housing estates across the city. The index has risen 5.45 per cent over the six-month period starting January, when it fell to its lowest level since August 2016.

“Prospective buyers have switched from buying to renting, and the inflow of students and professionals has greatly increased the demand for rental properties,” Yeung Ming-yee, senior associate director at Centaline Property Research, said in a report on Thursday.

“The private housing market has entered the traditional summer leasing peak season, and the number of leasing cases has increased, leading to a steady increase in rents. The rental market continues to be active.”

A man checks residential property advertisements displayed in Mong Kok on July 7, 2023. Photo: Edmond So

Centaline expects the index could climb by another 1.74 per cent to 116 in the third quarter, a level not seen since October 2021.

Housing rents have been rising in Hong Kong since the beginning of this year, due largely to an influx of mainland professionals and graduates.

A total of 4,426 property purchase transactions were recorded in July, down 7.34 per cent from June. Among them, residential transactions fell 15.16 per cent month on month to 3,065 deals, according to data released by the Land Registry on August 2.

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Knight Frank expects mass market and luxury rents to rise by 3 to 5 per cent for the full year in 2023, according to Lucia Leung, the property consultancy’s director of research and consultancy in Greater China.

“There is a trend that more people prefer to rent as there is uncertainty as to when interest rates will start falling,” said Leung.

At the end of July, interest rates in the city rose for the 11th time in 17 months, taking funding costs to the highest level since December 2007. The Hong Kong Monetary Authority, the de facto central bank in the city, raised the local base rate by 25 basis points to 5.75 per cent in lockstep with the US Federal Reserve.

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“We also notice that more corporations leased a number of flats as the accommodation for their staff moving from China,” Leung said.

Rents are expected to rise by 9.5 per cent for the full year, outperforming home prices, according to Derek Chan, head of research at Ricacorp Properties.

On a six month basis, overall home rents rose 3.2 per cent, with flats in the size category of 1,076 to 1,721 sq ft seeing the biggest growth of 5.5 per cent, according to the Rating and Valuation Department.

Home rents could rise by a further 4 per cent in the third quarter with the support of the traditional peak season, according to Ricacorp’s Chan.

“As students return and spur the leasing demand, rent in the fourth quarter may go up by 2 per cent,” said Chan.