Race to rent as buyers retreat

HONG KONG: Flat hunters are finding it increasingly difficult to rent a home in Hong Kong as uncertainty about the market outlook means there are fewer buyers and more tenants.

"I got back to a flat owner about my decision to rent his flat the very next day after viewing it, but the flat was already gone. This has happened to me three times in three weeks already," said Wong Lap-wai.

"It's like you need to compete with others for a flat, and owners expect you to decide whether you will rent their properties right after you view them — especially with offers that are close to market prices."

Wong, who recently became a father and now needs a bigger flat to accommodate the addition to the family and a maid, said he originally planned to buy a property.

However, given that flat values surged by more than 10% in the first half of this year and the outlook became uncertain after the government launched price-cooling measures, he grew concerned that the risk of flat prices falling was high.

"Many people share the same view," he said, adding that potential buyers were adopting a wait-and-see approach and therefore many were now looking for homes to rent instead.

Wong said rental prices had been surging due to the strong demand. He has therefore adjusted his budget for renting a three-bedroom flat in Yuen Long to between HK$10,000 and HK$12,000 (RM3,877.64 and RM4,653.17) per month, from HK$8,500 to HK$9,000 four months ago.

Patrick Chow Moon-kit, research head of Ricacorp Properties Agents, said the increasing number of hesitant flat buyers had boosted the residential leasing market, with more people now renting than buying.

Latest transaction data collected from the 50 largest housing estates that the firm monitors show that about 42% of deals are property sales, while the rest are leasing agreements. Among those who choose to rent, about 20% to 30% are potential buyers who are waiting for prices to drop.

"This happens every time the market changes its direction, as people want to watch the market more carefully," Chow said.

As a result of the government's measures to tighten mortgage loans, the market had become quieter and buyers were afraid that home prices had peaked, Chow said.

With home mortgage rates on the rise and flat prices having climbed significantly in the past two years, there were fewer potential buyers in the market because of the increasing costs.

As a consequence, rents had risen rapidly in the past two months. The average rent in the 50 housing estates monitored is now around HK$22.13 per square foot per month, close to its peak of HK$22.20 in September 1997 — and Chow expects the rents will continue to grow.

Ray Fong Man-wai, a sales manager at Hong Kong Property Services (Agency), said some flat owners had now returned to renting after selling their properties, as they were worried further government measures might push down flat prices.

"They think there is a higher chance for prices to go down than up, so they have sold their properties and now rent instead," Fong said.

He said 10 leasing deals were completed at Banyan Garden in Cheung Sha Wan in the first 10 days of this month — double the number of flats let in the same period last month.

Buggle Lau Ka-fai, chief analyst at Midland Realty, said an increasing number of people looking to rent was evident in the market, but summer was always the peak season for the residential leasing market. — SCMP