Hong Kong’s luxury renters broaden their horizons
With more employers choosing to restructure corporate packages and cut back on housing allowances, renters seeking residential leases at the luxury end of the market have been turning to less traditional areas
Residential leasing at the luxury end of the market is expected to hold up well over the next 18 months, bolstered by demand from inbound executives arriving to work in the finance, hi-tech and e-commerce sectors.
However, with many employers choosing to restructure corporate packages and cut back on housing allowances, there is also a discernible shift in interest towards non-traditional and newly developed areas.
Family budgets and value for money are clearly the root cause. But other considerations also come into play, most notably proximity to international schools, enhanced public transport, and a good range of local amenities.
As a result, prospective renters are looking beyond the more usual upmarket districts of Mid-Levels, Happy Valley and the stretch from Deep Water Bay to Tai Tam on Hong Kong Island’s south side. Now, they are just as likely to head first to Sheung Wan, Kennedy Town or Aberdeen – confident of finding a home there that fits the bill.
“Those three districts have become increasingly popular with both locals and expatriates looking to lease higher-end properties,” says Clara Chu, senior director of residential services for Colliers International. “Due to the extension of MTR coverage, we can also add Ap Lei Chau to the list, in particular the newer developments in that area such as Larvotto, Marina South and Mariella.”
While overall demand remains pretty robust, Chu admits there is often an element of downscaling and head-office cost cutting behind these choices.
“From the information we see, there is a clear trend showing that the number of corporate leases is declining,” she says. “Companies are switching expatriates to local packages because they want to save themselves the cost, effort and time involved in managing housing contracts for staff.”
In such cases, employees may get a corresponding bump in salary, but they are left to their own devices when it comes to house or apartment hunting, negotiating terms, and paying the monthly rent out of their own pocket.
“Of course, that has brought a change in end-user needs and expectations,” Chu says. “It has meant that executives in the higher salary brackets have been prepared to move into smaller-sized apartments in less expensive areas.”
In some instances, such choices directly mirror the opening of new international schools or campuses, including in Kowloon and the New Territories. For parents, being close to a school, or within the designated catchment area, can rank well ahead of harbour views, living in the “right” location, or being just a short hop from the marina or country club.
Against a backdrop of continuing uncertainty about the global economy, despite the recent records on some stock markets, Chu suggests two trends worth watching in the coming months.
One is the possibility of a downturn in the United States and Europe prompting more senior managers and entrepreneurs to push for transfers or try their luck in Hong Kong. This, though, might have no – or even a negative – impact on the top-tier residential market if the executives concerned opt for serviced apartments and do not bring their families.
“In fact, our forecast for the year shows a possible 5 per cent fall in the overall luxury rental market,” Chu says. “However, demand for mid-range properties – those in the HK$40,000 to HK$80,000 per month band – should increase. And, with new hot spots, the choice of neighbourhoods for expatriates to consider is becoming more diverse.”
For Stella Abraham, head of residential and relocation services at Jones Lang LaSalle, the focus on “more affordable units”, which began in the immediate aftermath of the global financial crisis, is still the guiding principle for most tenants. When a multinational employer decides not to foot the bill for accommodation, then that is the logical way to go.
“We notice that end-users are increasingly concerned about the layout and condition of units, rather than size, a result of budget constraints and sometimes limited availability,” Abraham says. “They are also more likely to ask about rental discounts or flexibility in their leases.”
She adds that improved transport infrastructure will continue to boost the appeal of emerging districts like Western and along the MTR’s South Island Line. Supply-led interest in parts of the New Territories is also on the rise, with the lure of international school places providing further reason for families to widen the geographical scope of their search.
“In general, we expect leasing activity to pick up this year, especially during the second- and third-quarter peak,” Abraham says. “Luxury rents came down 7.2 per cent in 2016, but we expect the decline to moderate. The HK$30,000 to HK$100,000 bracket is forecast to be the most active and, in that segment, availability will remain tight.”