Hong Kong rents could be about to march higher after five months of deflation, analysts say
- Hong Kong rents have depreciated 5.3 per cent from August through January
- Recent data indicates rate of deflation is slowing, suggesting a bottoming trend and paving way for possible return of a rising cycle, property analysts say
Hong Kong renters hoping for a prolonged bout of deflation could be in for disappointment in the next few months as data shows rental prices may be about to round the bottom, bringing an end to a soft patch that started in August.
On average, residential rents dropped 0.3 per cent to HK$35.8 per square foot (US$4.56) in January from December, the smallest contraction in the past five months, according to data released by Centaline Property Agency on Wednesday.
“It is a sign showing the end of the correction,” said Wong Leung-sing, senior associate director of research at Centaline.
He said the rental slump could end by the second quarter after declining since August.
Wong said an uptick in residential sales in January could be an indicator that the rental market will soon begin to firm, as the two markets are positively correlated.
“The residential sales market became more robust in January,” Wong said.
From a high of HK$37.8 per square foot in August, rents have deflated 5.3 per cent in the five months through January.
January’s drop of 0.3 per cent on month compares to the 1.9 per cent decline in December and a 2.1 per cent fall in November.
Centaline complied the data on its own leasing deals across 107 major residential communities in Hong Kong.
Ricacorp head of research Derek Chan believes the pace of decline in rents will continue to narrow in the first quarter.
Whether rents will switch back to an inflationary footing will depend on home sale trends, Chan said.
He said home prices could stabilise in the second quarter before slowly climbing in the following quarter.
“Renters could take the current opportunity to rent as this is a seasonally slack period. The market is likely to heat up in the summer, the traditionally brisk season, and rents are more likely to pick up,” he said.
Last week, a local couple signed a lease agreement on a 309 sq ft flat in Cheung Sha Wan at HK$46.9 per square foot. The monthly rental works out to HK$14,500, or about HK$2,500 lower than the initial listed price, according to Hong Kong Property.
Additional reporting by Lam Ka-sing