Rents for Hong Kong’s luxury homes fall by as much as 25 per cent as coronavirus causes job losses, expat exodus

The slide in Hong Kong’s rents is getting steeper as the coronavirus crisis and protests lead to job losses and an exodus of expats and students fleeing the city.

Rents in high-end districts have been hit hardest, tumbling by up to a quarter from their peaks, according to agents, while data showed the average rate across the whole city slumped to the lowest in almost three years in February.

“The virus is reducing demand for properties as people either leave Hong Kong or have less job security,” said Victoria Allan, founder and managing director of real estate agency Habitat Property. She said rents shrunk 15 to 20 per cent in the sought-after Mid-Levels and the southern district between June last year and March.

Downward pressure is more obvious on rents above HK$100,000 (US$12,894) per month and also larger blocks where there is existing vacancy, said Allan. Rents at the lower end of the market, in areas like Sheung Wan, Sai Yung Pun and SoHo, are also softening as many young professionals are losing their jobs.

The city’s unemployment rate climbed to a nine-year high of 3.7 per cent in February.

“We have seen a spike in people breaking their leases because of job losses,” she said. “Many tenants are also nervous to sign new two-year leases, so are extending existing leases for shorter periods while they check job security.

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“The fall in luxury home rents will be bigger as there is less demand. It will only fall further, [particularly for] properties that are not well renovated.

“We anticipate another 5 per cent drop in luxury home rents as we feel the market had already factored in a lot of the reduced demand from Covid-19.”

One flat measuring 1,674 sq ft at Pacific View in Tai Tam was leased at HK$60,000, down 23.1 per cent from its peak two years ago, according to Habitat Property.

“Some staff of foreign firms have left Hong Kong after the protests [broke out]. Now with the pandemic, there are no new foreign staff coming. Without new demand, rents naturally have to fall,” said Victor Wu, a branch manager at Centaline Property Agency.

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The average monthly rent in February fell for a seventh straight month, dropping 2.2 per cent to HK$35.4 per square foot, the lowest level since May 2017, according to Midland Realty. It is down 7.6 per cent since July last year.

February’s drop is the biggest during the current decline, which is the longest since 2008, said Wong Leung-sing, senior associate director of research at Centaline, who forecast rents will continue to fall. Whampoa Garden, a mass-market development in Hung Hom, saw the biggest drop, of 5.7 per cent.

In particular, one flat of 420 sq ft at The Arch, a luxury project in West Kowloon, was leased at just HK$19,000, or HK$45 per square foot in mid March. That is 43 per cent lower than the peak of HK$79 per square foot in April last year, and back to the level four years ago, according to agents.

More affordable districts like Sha Tin, Tai Wai and Hung Hom have seen rents come down by 10 to 20 per cent from their peak after mainland Chinese students fled the city amid stand-offs between protesters and police on university campuses in November.

“Homeowners are taking the initiative to slash rent now. The market is now dominated by local renters. Now we do not see students coming,” said Dicky Chiu, Centaline’s deputy district sales manager. “It remains questionable whether they will come for the start of semester in September if the pandemic persists.”

Harbour Place in Hung Hom, in which more than 30 per cent of flats are rented by mainland students, has seen average rents fall 20 per cent to HK$38 per square foot as the number of listings has surged.

Four out of 10 flats were leased for HK$15,000 or less in the first two months of this year, the highest proportion since the second quarter of 2016, said Buggle Lau, chief analyst at Midland Realty.

For instance, one flat measuring 183 sq ft at South Walk Aura in Aberdeen leased at HK$8,200, according to agents. The rent is the lowest among new flats on Hong Kong Island and similar to that of subdivided flats in Causeway Bay.