Hong Kong’s residential leasing market will be under pressure in the last three months of this year as the traditional low season coincides with the worst recession in decades, property agents said.
With many companies reliant on government handouts to stay afloat, more redundancies are likely in the next six months with obvious negative implications for local housing demand, according to Savills.
“The rental market still seems precariously balanced as tenants and landlords face uncertain prospects,” said Simon Smith, senior director, research and consultancy, at Savills. “We expect the final quarter of 2020 to present further challenges.”
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The official rental index in August was down 9.2 per cent from its peak a year earlier, according to data from the government’s Rating and Valuation Department. Monthly rents for apartments have been dropping steadily.
A flat measuring 551 sq ft with three bedrooms at Kingswood Villas in Tin Shui Wai was leased for HK$10,000 (US$1,290), or HK$18.1 per sq ft, last week, according to Jerry Tse, senior branch manager at Many Wells Property Agent. That compares with the usual HK$10,500 to HK$13,500 monthly rent for flats in that area.
A tiny apartment at Ava 61 in Cheung Sha Wan was leased for just HK$8,000 last month, 12.5 per cent lower than the market rate, said Ray Ip, a marketing manager at Hong Kong Property Services (Agency).
Landlords have been trying to boost demand by offering incentives other than direct reductions in rent, agents said.
“Landlords and tenants are learning to navigate the current uncertainty with one-year leases, early handovers and rent-free periods,” said Aradhana Khemaney, head of residential services at Savills. “The fourth quarter is likely to see more challenges and we expect rents to soften further.”
Knight Frank has also seen more landlords willing to provide incentives to attract tenants, rather than lowering the asking rent.
“Prices will still be under pressure because of protracted unfavourable factors, including the weak economy and rising unemployment rate, which might erode affordability over time,” said Martin Wong, associate director of research and consultancy, Greater China, at Knight Frank.
Town house rents slipped by 0.8 per cent in the third quarter, representing a sixth consecutive quarter of decline, according to Savills.
Ina Chan, the third wife of the late gaming tycoon Stanley Ho, recently leased a house at Unir Garden in Shek O measuring 2,564 sq ft to Harry Lee, a member of the controlling family of Hysan Development, for HK$135,000 a month, about a third less than the rate in 2013, according to Land Registry records.
Luxury residential rents traditionally mirror movements in prime office rents in Central, where rates have fallen and vacancy has been creeping up, according to Savills.
Serviced apartments have offered a series of promotions to rescue shrinking occupancy levels, such as flexible lease terms, according to Savills. They are popular given concerns over the tough operating environment faced by many businesses.
Some hotel-like apartments offer “two for one” deals – a two-month stay for the price of one. Rents in this segment are continuing to drift downwards.
Activity in Hong Kong’s overall property sector is picking up speed, according to Midland Realty.
The agency expects the total number of property transactions, including homes, parking spaces, retail, commercial and industrial properties to reach 6,500 in September, up 20.6 per cent from August.
More from South China Morning Post:
- Hong Kong’s August home price index drops by the most in six months as recession, Covid-19 sap investment appetite
- Hong Kong property transactions sink to lowest level since April as third wave of coronavirus weighs on sentiment
- Hong Kong’s lived-in home prices decline as third wave of virus outbreak halts recovery
This article Hong Kong’s home rental market faces tough fourth quarter as recession makes redundancies more likely first appeared on South China Morning Post