Hot luxury market leaves rent refugees out in cold

PROSPECTIVE tenants shopping for their ideal flat should think twice before rushing into enticing deals offered on luxurious new blocks.

When the time comes for lease renewal they could become ''rent refugees'', unable to afford the same flat without the generous rent-free periods they were given to entice them into the building initially.

Luxury residential leasing is currently a landlords' market, according to Mr Derek Larsen, residential manager at Brooke Hillier Parker.

Mr Larsen said some new blocks would soon be coming up for rent renewal, and also advised that break clauses and prices had risen 20 per cent in some cases.

He said initial offers of good terms by developers were traditional practice to fill buildings.

Not to take this into account was ''a fatal error people make when jumping into new buildings''.

Ms Isabel Michie, executive director, residential, at First Pacific Davies, pointed out that it was the market that drove prices up, not a landlords' conspiracy.

There had been some ''rent refugees'' because of the way the market was behaving, she said.

Some buildings had seen increases of more than 30 per cent over 18 months.

Ms Michie said on some occasions people had not entered into a lease if the landlord was offering terms such as a two-month rent-free period at the outset.

''Some people realised that they didn't have the budget and looked at what they knew the figure would be the next time around.

''It's very unusual but it has happened with a few clients.'' Mr Larsen said in Scenecliff, in Conduit Road, a 1,000-square-foot flat that had been $15,000 a month two years ago was now close to $25,000.

In Dynasty Court, in the Mid-Levels, people were initially going in at $38,000 per month on middle floors.

Some of the same flats are now $51,000 or $52,000.

Nevertheless, rents of $50,000 to $53,000 were still being comfortably achieved by landlords, he said.

''To date the market hasn't been affected. Hongkong is one of those places, '' he said.

''In two or three years it could be a tenants' market. Now it's still a landlords' market.

''Gazumping is still common. Landlords are playing tenants off against tenants. It's a very hot market.'' However, he said companies realised that housing would be a major cost factor in bringing staff to Hongkong.

Ms Michie said that some United States companies were already taking rent rises into account.

They were extremely flexible and not prepared to cut costs as they did not want unhappy executives. US companies are the biggest spenders on expatriate housing.

However, Ms Michie said some well-established Hongkong companies were not prepared to go up 25 per cent to keep their staff in the same flats.

''Some are moving staff to slightly cheaper accommodation. It's not too drastic. Nevertheless, it's a comedown.'' Several agents have noticed a marked increase in companies coming to them for advice on rentals, although it is now becoming increasingly common for companies to give their staff lump-sum packages for housing rather than taking on leases on their behalf.