Why Hong Kong’s office market has the edge over Singapore’s, despite the eye-popping rents in Central
- While it’s easy to assume Hong Kong’s runaway prices and growing instability will benefit competitors, including the Lion City, that doesn’t take account of the city’s decentralised, mature office submarkets that Singapore has yet to fully develop
The refuge receiving the most attention is Singapore, Hong Kong’s arch-rival in the battle for dominance in Asian finance.
In the real-estate sector, the city state enjoys several advantages over its chief competitor. For starters, occupancy costs for Grade A office buildings – which include rents, service charges and government taxes – in Singapore are more than two-thirds less than in Hong Kong’s Central district, and roughly half those in London and New York. What is more, Singapore is the preferred location for the regional headquarters of global technology firms, which benefit from favourable government policies and access to strong pools of talent.
Second, Singapore has kept its housing market on a tight regulatory leash for the past decade to avoid the runaway price growth witnessed in Hong Kong. Since 2014, property values in the two cities have diverged sharply, with secondary home prices in Hong Kong continuing to skyrocket while remaining broadly stable in Singapore.
According to the latest edition of UBS’ Global Real Estate Bubble Index, published in September, Hong Kong has experienced the biggest decoupling of house prices from local incomes among 20 leading residential markets, with a skilled service worker needing to work a staggering 22 years to afford a 650 square foot flat near the city centre.
However, Singapore is by no means cheap. Even in the office market, the city state was the 14th-most-expensive location out of 122 markets tracked by CBRE, a property adviser, in a report on prime office occupancy costs published last week.
