Rents surge as prospective buyers stay out of market

HONG KONG: Rents for luxury properties in Hong Kong have grown at twice the rate of the mass market this year as prospective buyers opt to lease instead, according to property agents.

Eric Cheung Wai-man, a director of estate agency Ricacorp Properties, said rents for luxury residential flats had risen by between 2% and 3% a month this year, compared with rises of between 1% and 1.5% in the mass market.

"There is a limited supply of luxury homes in the market," he said. "As the economy is doing well and people are able to make money, they are willing to pay more for quality."

Evidence of the demand at the top end of the market came from Sino Land, which is about to close a leasing deal for a luxury house at its Three Bays development at 7 Stanley Beach Road for HK$83 (RM31.91) per square foot, up 15% on a year ago and a new high for the project. The monthly rent for the four-bedroom, 3,870 sq ft house is HK$321,000.

Sino Land said rentals of the luxury flats had been strong during the summer peak. The position, overlooking Stanley beach, Turtle Cove and Tai Tam Bay, has made the area attractive to executives of multinational companies.

The developer expects the rents to rise by another 8% by the end of this year.

Cheung said another reason for surging rents was the government's cooling measures, including the stamp duty rise in November and the tightening of mortgage loans announced in June. These targeted properties costing more than HK$6 million and had made potential buyers more hesitant to enter the market.

According to Ricacorp research, the number of transaction at 35 luxury developments it monitors fell 37% from 115 deals in June to 72 last month. The figure is even lower than the bottom reached during the global financial crisis, when there were only 82 sales in August 2008.

The agency said the drop was much steeper than that for the mass market last month, which fell by only 17% over the previous month.

Thomas Lam Ho-man, director and head of research at Knight Frank, said the leasing market for residential properties had become more active because many people now preferred to rent rather than buy.

"Before, some expats would consider purchasing a property after living in the city for a period of time. But now they think property prices are too high," Lam said. He pointed out that luxury prices rose about 10% in the first half of this year.

Owners were now asking for rent increases of between 20% and 30%, he said, and some expatriates were still willing to pay because they did not want to relocate.

Lam said there also was demand for luxury homes from mainlanders. Some were looking in Southern district, such as Cyberport and Shouson Hill Road, where there were international schools. He expects a further single-digit rise in rents in the second half of the year because of economic growth and the limited supply of luxury properties. — SCMP