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HONG KONG: Residential rents are on the rise again in Hong Kong after being on hold for four months.
"Rents of mass housing units had been flat for four months after the government imposed an additional stamp duty at the end of November last year," said Patrick Chow Mun-kit, head of research at estate agency Ricacorp Properties. "But last month we saw them pick up again."
According to the firm, rents of units in major housing estates rose 4.2% in the third quarter of last year. But growth slowed in the fourth quarter, with an increase of 2.5%.
"Rents then remained flat in January and February this year. However, this changed in March, which saw rents up strongly to record a 2.6% rise for the first quarter," Chow said.
The sharper growth recorded in March was because many potential buyers had turned instead to the leasing market, he said.
"The average price of homes in major housing estates surged 11% in the first quarter. It has now reached a high level which has made some potential buyers hold back their purchase plans and lease flats instead," said Chow.
After a strong take-up rate in March, the firm estimates there are now fewer flats available for leasing than in November.
"This will see rents record sharper growth in the next few months. The growth will be in line with inflation or even sharper," predicted Chow, who expects rents in major housing estates to rise 10% this year.
Anita Cheung Pui-lui, research manager at rival estate agency Midland Realty, also expected residential rents to grow by 10% by the end of this year.
Based on leasing transactions conducted by the firm, rentals in the 100 major housing estates in Hong Kong rose by some 2.8% to HK$20 (RM7.76) per sq ft in the first quarter, she said. Taikoo Shing in Quarry Bay recorded the highest growth, with average rents up 4.1% from HK$27 per sq ft in December last year to HK$28.1 per sq ft in March.
That is the highest level since October 1997 and only 3.9% below the market rental peak of HK$20.85 per sq ft reached in September 1997.
"We believe residential rents will hit a record high in the second half — sooner than property prices," said Cheung. "Many investors changed their investment strategy after the government imposed additional stamp duty last year. They preferred to lease their flats rather than sell them. As a result, residential rents dropped at the end of last year and began to pick up recently after the property prices rose significantly in January and February."
Cheung said the fact that banks had now increased their mortgage rates and the government had released more development sites for sale might encourage more potential buyers to shift to the leasing market.
"Residential rents will continue to increase following the increasing housing demand," she said.
More than 70% of the leasing transactions conducted by the firm in March were at prices of more than HK$10,000 a month, Cheung said, compared with some 60% a year earlier.
"The minimum monthly rent for a flat in major housing estates such as Taikoo Shing in Quarry Bay, Laguna City in Kwun Tong and South Horizons in Ap Lei Chau has increased to HK$10,000 or above," she said. — SCMP
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