Hong Kong property

Mass market home rents surge, luxury rents flat

While prices have been rising in the mass market, and are likely to push up Hong Kong's inflation rate, luxury sector rents have remained flat

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 3:13am

Surging mass market home rentals so far this year have hit the headlines in Hong Kong, but in the luxury sector rents have barely budged - prompting quips of a "tale of two rental markets".

In the 50 housing estates monitored by estate agency Ricacorp Properties, rents in October were found to have risen by an average of 1.9 per cent month on month to HK$25.17 per square foot - the highest level on record since it began monitoring rents in January 1997.

In September, rents in the 50 estates averaged HK$24.70 per square foot.

"Rents in the mass market have risen for nine consecutive months and are now 15.5 per cent higher than their level at the start of the year," said Patrick Chow Moon-kit, head of research at Ricacorp Properties.

Demand for residential leasing continued to rise despite the increased rents, Chow added, as some home seekers turned to the rental market after the government announced new stamp-duty policies aimed at cooling down the city's home prices.

"Mass home rents will see a continued rise of another 2 to 3 per cent to hit around HK$25.70 per square foot by the end of the year," he said.

In a separate survey, estate agency Midland Realty said it measured a 15.9 per cent rise in rents in the mass home market in the first 10 months of the year to HK$23.30 per square foot. Chief analyst Buggle Lau Ka-fai said the continuing rise in home rents would add pressure to the city's inflation rate and this would be reflected in the forthcoming data.

The city's consumer price index registered an annualised increase in prices of 3.8 per cent year on year last month, unchanged from September.

In the luxury home leasing market, rents rose by just 3 per cent between January 1 and September 30, versus a 10 per cent rise in mass market rents over the same period, according to property consultancy CBRE.

How much of an impact the new measures brought in to curb speculative home sales will have on rentals remains to be seen, said Anne-Marie Sage, regional director for property consultancy Jones Lang LaSalle Hong Kong. If increased rental stock was released into the market from vendors who had postponed their decisions to sell, then rents should soften, she said.

"However, we may also see potential buyers renting for the interim period, feeling that prices may come down, in which case this will put pressure on rentals as stock is taken up," she said.

Sage said of the rental market this year: "We have seen the same number of families relocating to Hong Kong that we saw in 2011, but there has been a shift of industries that they come from.

"We have seen a 25 to 30 per cent drop in the number of families coming in from the financial sector but a large increase in families from the retail sector."

These two sectors occupied two broadly different rental brackets, Sage said. Tenants from the financial services sector were willing to pay from HK$80,000 to HK$150,000 per square metre for rental accommodation; those from the retail sector were generally willing to pay HK$40,000 to HK$80,000 per square metre.

She believes that luxury rents will come in fairly flat, with probably a very slight decrease.