Hong Kong: Owners prepared to cut rents rather than selling at a loss

KUALA LUMPUR (June 24): A myriad of events are eroding rents in Hong Kong. Some have described it as a tenants’ market, with JLL saying owners are “prepared to cut rents, rather than selling their assets rather at a loss”.

Habitat Property told South China Morning Post (SCMP) that in the “past 12 to 18 months, trade war, social unrest, and the coronavirus pandemic have combined to erode high-end rents by 15% in the city”.  

And the latest development, the national security law, is threatening Hong Kong’s reputation “as a hub for multinationals and banks” and in turn could impact “a rich pool of renters among their expatriates and other high-earning executives”, wrote SCMP.

“The downward trend will continue for a while because at the moment, we do not see many positive supporting factors in the leasing market,” founder and chief executive of Landscope Christie's International Real Estate, Koh Keng-shing told the Hong Kong-based English language daily.

He said he “has seen people downgrading from monthly rents of HK$200,000 [RM110,260] and HK$300,000 to the HK$100,000-HK$150,000 bracket, or even to the sub-HK$100,000 levels”.

Koh explained that a slower demand for the lease of luxury properties will also likely “pressure capital values” as such assets are “held as long term investments and the decline of rents is eroding the expected return”.

JLL’s Residential Market Monitor Report published last month showed that capital values of luxury residential properties in Hong Kong fell by 8.6% from the highest in the second quarter of 2019.

Of note, a 5,630 sq ft duplex unit (owned by Taiwanese actress Wu Pei-chi) on the 50th and 51st floor of Arezzo at 33 Seymour Road in Mid-Levels was leased at HK$100,000 a month.

SCMP reported that price was “half the average rate on small and medium-sized homes in the city tracked by Midland Realty”.

Some reports “suggest” this meant that “rates have crashed” while other observers said that the rental price was “an anomaly, or a mate’s rates deal”.  

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