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Luxury rental prices fired by executive moves

HONG KONG: A sharp increase in the number of expatriate executives moving to Hong Kong with their families helped drive a 10.9% rise in rentals of luxury residential properties in the first half of this year — and the trend looks set to continue over the remainder of the year, according to property consultants.

"This is simple supply and demand. We have seen a 33% increase in the number of new families relocating to Hong Kong in the first half of this year compared to the first half of 2009," said Anne-Marie Sage, regional director of the residential division of property consultancy Jones Lang Lasalle.

"The new demand is mainly from the financial sector, with large corporations expanding and new hedge funds and legal companies setting up in Hong Kong," she said.

As a result, rentals increased 5.8% in the second quarter following a 4.8% rise in the first quarter, and expatriate tenants are being forced to bear the consequences of sharply rising living costs.

"Rental allowances for large companies were generally reduced due to the recession and cutbacks made by the companies last year. Unfortunately the Hong Kong market moves so quickly that no sooner had these cuts come into effect then the leasing market began picking up," Sage said.

Island South and The Peak saw the biggest increases in rentals in the second quarter, while Mid-Levels experienced the biggest increase in the first quarter, she said.

"Areas like Clearwater Bay, Sai Kung and Discovery Bay are popular with families who want the luxury of space and gardens at a lower rent than Island South. However, due to popularity and lack of supply, gone are the days you can find a selection of houses for around HK$30,000 (RM12,341.17) a month. Popular village-type properties that have been renovated in Clearwater Bay are now achieving up to HK$150,000 per month," she said.

"We expect this rise to continue for rest of the year with a further 10% growth for the second half."

With continued increases in rentals, Sage said the trend for companies to encourage personal leases taken out by staff members was expected to grow. "I expect this trend to continue with only very senior management left holding company leases," she said.

Another property consultancy, Savills, said the rising trend in rents on Hong Kong Island had prompted some tenants to look for cheaper homes that nonetheless offered good quality. Discovery Bay continued to gain in popularity among expatriate families because of the space and higher-quality living environment on offer.

"The rental differential between Discovery Bay and traditional luxury districts on Hong Kong Island has narrowed, with the average discount falling from 47% to 36% over the past three years," according to Savills' latest research report.

Low-rise units and garden houses are the most popular housing types in Discovery Bay, with rents up by 5%-14% over the second quarter of this year.

Island South, with more choices of private or international schools, also remained a favoured housing locality for the expatriate community. Average rents of luxury flats and townhouses in Southside were up by 4.6% and 3.9% over the quarter, respectively — outstripping the overall market, Savills said. — South China Morning Post
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