Hong Kong rents at levels before global financial crisis

HONG KONG: Residential rents in Hong Kong have rebounded to levels last seen before the onset of the global financial crisis in 2008. A survey by estate agency Midland Realty shows the average rent in Hong Kong's 100 major housing estates was HK$18.20 (RM7.48) psf at the end of March, up 5.1% in 1Q and back at the level last reached in July 2008.

The Midland data shows that average rent dropped 22.5% to a low of HK$14.10 psf in November 2008.

Chief analyst Buggle Lau Ka-fai said residential rents had now surged 29.1% in the past 15 months while prices jumped 34.8%.

Since flat owners could generate higher profits from the sale of their units, there were just 5,000 units available for lease in major housing estates currently, he said. That was down 26% from the close to 7,000 flats available for lease at end-2008, and the shortage of supply had helped drive rents higher, he said.

The vacancy rate of rental flats in the housing estates had, meanwhile, fallen to 4.3%, a record low since 1998. Lau forecast residential rents would rise a further 7% in 2Q due to increasing demand and limited supply.

"The number of expatriates working in the city dropped to 20,988 last year after the financial crisis, compared with 26,466 in 2008. Their numbers are now once again growing following the recovery of the economy and the demand for residential leases will continue to increase," he said.

The return of expatriates was clearly evident in the luxury residential market, Koh Keng Shing, the managing director at Landscope Realty, said. "The peak season for the leasing market will now likely come early in May," Koh said, pointing out that the market formerly reached its peak in June and July.

"The market has turned active since the end of March. Many expatriates are looking for apartments as they plan to move to Hong Kong during the summer holiday."

The return of demand had until recently come mainly from expatriates employed in middle management positions who had rental budgets that ranged between HK$50,000 and HK$80,000 a month, Koh said. But more recently, demand from senior executives with budgets ranging from HK$80,000 to HK$150,000 a month had also begun to rebound.

The weight of new money entering the market was already changing expectations, said a property agent, who was seeking tenants for a 1,509 sq ft flat at Chelsea Court on the Peak at a rental of HK$62,000 a month in the beginning of March.

Several tenants had expressed interest in the unit and were willing to offer higher prices, he said. The flat was eventually leased for HK$68,000 or HK$45 psf. He expects rents for luxury flats will jump up to 20% year-end. -- South China Morning Post
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