Serviced flat rents rise as demand surges

HONG KONG: Rents of serviced apartments have risen strongly this year because of an influx of expatriates relocating to Hong Kong as a result of the expansion of financial institutions.

Tai Hung Fai Enterprise's managing director Edwin Leong Siu-hung said his group had raised rents twice this year and would do so again before the end of the year.

Tai Hung Fai owns two serviced apartment projects in Hollywood Road and in Fortress Hill and Leong said rents at the flats in Hollywood Road had now risen by 20%.

"We have also raised rents of Shama Fortress Hill twice this year — by 5 to 8% on each occasion — and we will raise them again by the end of the year. That will leave total rental growth for the year at Shama at about 15%," he said.

Leasing activity in the sector has been robust since early this year. Rents rose 3.4% in the third quarter following a 6.7% rise for the first half of the year, giving a total rise for the year to date of 10.1%, Anne-Marie Sage, regional director and head of residential leasing and relocation services at property consultant Jones Lang LaSalle, said.

Research by property agency Colliers International pointed to an increasing number of expatriate family arrivals this year, mainly as a result of the expansion in the banking and finance industries. This had prompted exceptionally strong demand for large serviced apartments, particularly those larger than 2,000 square feet, it noted. It also found more tenants were extending their leases by up to 12 months because of the limited available stock.

Among the expatriate newcomers to Hong Kong is Kuang Ling, a young Beijing banking executive who was assigned to work in Hong Kong for a year. Her bank paid HK$35,000 (RM13,943.50) a month for her to live in a 780 square foot serviced flat at Shama Causeway Bay for three weeks last month.

"It helped me to settle down in a new environment and gave me more time to look for a leasing flat," she said. She now rents a one-bedroom flat in Wan Chai for HK$8,500 a month. "The rent of the serviced apartment was very expensive. I could not afford to continue paying so much."

Those who would like to continue living in their serviced apartments should brace themselves to pay even higher rents, landlords warn. "Demand is very strong. Our serviced apartment in Hollywood Road is fully let and the occupancy rate at Shama Fortress Hill remained above 90% so far this year," Leong said.

"Many expatriates would prefer to live in a serviced apartment rather than lease flats in Mid-Levels and Island South. The cost of living is often cheaper if you factor in expenses such as electricity, water and gas," he said.

Leong said he believed that rents would rise a further 5 to 10% in the next 12 months.

Property consultancy Jones Lang LaSalle echoed this sentiment and said as firms continued to expand aggressively and new companies entered the market, demand would remain strong.

"There is very little supply due to come onto the market. The largest release in the year was The Lily in Repulse Bay developed by Chinachem Group, and having only launched at the end of May we already have full occupancy," Sage said. She also expects rents will continue to rise by 8 to 10% in the next 12 months.

Benedict Ma, associate director of research at property consultant CB Richard Ellis, said the vacancy rate for serviced apartments dropped to less than 5% in the second quarter from 10% in the first quarter. He expected the third quarter vacancy rate to be lower than that in the second quarter once results were out.

Colliers International said it expected rents of serviced apartments would increase by about 15% over the next 12 months. — South China Morning Post