Luxury home rents are back on the rise, ending eight consecutive quarters of decline, as mainland Chinese executives, flush with funds from successful initial public offerings in Hong Kong, drive leasing transactions at the top end of the market, say property agents.
Rents for luxury homes jumped 5 per cent in April and May, after falling as much as 13.5 per cent from a record high in August 2109, according to data from the Rating and Valuation Department.
“Hong Kong Island tenants traditionally come from finance related industries, which are benefiting from the flourishing IPO market,” Aradhana Khemaney, head of residential services at Savills, wrote in the consultancy’s latest report on residential leasing.
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Hong Kong’s IPO market has been busy in the first five months of this year, with companies raising a record HK$184 billion from initial public offerings in Hong Kong, a 620 per cent jump over the same period in 2020, Savills said. Kuaishou Technology, the operator of China’s second-biggest short video-sharing app, launched this year’s biggest IPO, mopping up US$6.2 billion in January.
All districts on Hong Kong Island recorded mild rental increments in the second quarter, with Mid-Levels posting the largest rise at 0.7 per cent, followed by Pok Fu Lam and The Peak, Hong Kong’s most prestigious address, at 0.5 per cent, according to Savills.
“The luxury residential leasing sector has stabilised,” said Koh Keng-sing, chief executive and founder of Landscope Christie’s International Real Estate, which focuses on luxury residential sales and leasing in Hong Kong. “Most big-ticket leasing deals recently were done by mainland enterprises rather than multinational corporate tenants.”
Apart from executives of mainland Chinese firms that successfully launched IPOs in Hong Kong seeking quality accommodation, Koh said he noticed quite a few big budget renters were executives of privately run Chinese companies. These big renters were mostly interested in houses with areas ranging from 3,000 sq ft to 5,000 sq ft in the Southern district that includes Repulse Bay and on The Peak, with monthly rents ranging from HK$300,000 to HK$500,000 per month.
Centaline Property Agency said that recently it helped a client lease a 1,600 sq ft unit at University Heights in Kennedy Town for HK$98,000 per month, or HK$61.3 per square foot.
“More than half of our renters for homes costing between HK$100,000 and HK$200,000 per month are mainland businessmen or executives of listed mainland enterprises,” said Ada Ng, senior regional sales director for Mid-Levels West District at Centaline. “Leasing demand will be boosted by more executives returning to Hong Kong when the border reopens.
“This deal reflect an obvious improvement in the luxury leasing market, as landlords were offering little room for negotiation compared to last year,” she said, adding that last year, most landlords were willing to cut rents by as much 20 per cent to 30 per cent when leases were due for renewal or to let their vacant units.
Rents for homes larger than 1,076 sq ft showed the biggest gain, rising a combined 3.3 per cent in April and May, after rents in this category dropped to a nine-year low in March, Rating and Valuation Department data showed. Rents for units smaller than 1,076 sq ft rebounded 2 per cent in the same period, after falling 12.8 per cent from the peak in August 2019.
Some recent deals indicate the direction of the leasing market. In mid-May, a 7,022 sq ft detached house on 73 Mount Kellett Road, The Peak, was leased for HK$1.6 million (US$206,000), or HK$228 per square foot, making it the most expensive in per square foot terms in Hong Kong this year.
It came a day after a 4,419 sq ft house at 38 Repulse Bay Road was rented out for HK$700,000 per month, or HK$158 per square foot, according to Savills.