Hong Kong luxury residential rents to drop by up to 10% this year | Realestate Asia
,Hong Kong
15 views

Hong Kong luxury residential rents to drop by up to 10% this year

Blame it on weak expat demand and their shrinking housing budgets.

Despite developers turning conservative in marketing new projects in the beginning of the year, JLL reveals buying sentiment picked up gradually after the Chinese New Year. Reasonably priced projects were generally well received during the quarter. For example, all of the 145 units launched at ‘Monaco’ in Kai Tak, developed by Wheelock Properties, were sold on the first day of the project’s launch.

There remained almost no new expat arrivals in the quarter. According to JLL, housing budgets for existing expats continue to shrink. Driven by the relaxation of social distancing measures during the quarter, viewing activities increased from very low levels with the luxury rental market mainly supported by local demand.

Here’s more from JLL:

Government to tender 15 residential sites

A total of 99 luxury units are expected to be issued with their occupation permits in 1Q21, including ’21 Borrett Road (Phase 2)’ by CK Asset (50 units) and ‘Central Peak (Phase 2)’ by Sun Hung Kai Properties (19 unit); both in the Mid-levels.

A total of 15 residential sites were listed in the FY2021/22 Land Sale Programme, capable of providing some 6,000 units. Coupled with MTRC and private development and redevelopment sources, the land supply for private housing for the coming financial year can potentially yield 16,500 units, 28% higher than the government’s reduced target of 12,900 private flats per year.

Luxury capital values rebound owing to notable transactions

Luxury capital values rebounded by 0.8% q-o-q in 1Q21 after dropping 8.2% in 2020, largely attributed to several eye-popping transactions in the primary market during the quarter.

Supported by local demand amid the ongoing border shutdown, luxury rents remained almost flat, dropping a mere 0.2% q-o-q, after a significant slip of -13.3% in 2020. Among major submarkets, the New Territories recorded the most marginal decline with rents down only 0.1% in 1Q21.

Outlook: Luxury sector mired by high vacancy

With new luxury units continuing to trickle in and offshore buyers still restricted from entering Hong Kong for inspection, demand for luxury properties should remain soft. Prospective buyers will likely continue to ask for discounts given the high vacancy level, despite the low interest rate environment. As such, we maintain our forecast for capital values to drop in a range of 5-10% in 2021.

We expect to see more leasing enquiries in the coming six months amid the traditional home search season. Still, the luxury leasing market is likely to be less active compared to previous years, owing to weak expatriate demand in tandem with their shrinking housing budgets. Luxury rents are forecasted to drop in the range of 5-10% in 2021.

Note: Hong Kong Residential refers to Hong Kong's overall luxury residential market.

 

Get Realestate Asia in your inbox
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

There were no new project launches in June.
The Osaka Umeda Twin Towers South will lead the supply throughout 2022.
Newcastle, Wollongong, and Gosbord are attracting hefty investments.
Investment sales surged to 86.3% in the second quarter despite tightened restrictions.
One company will invest US$10b in Japan, 70% of which will be invested in office buildings.
Institutional investors accounted for 71% of all commercial transaction volumes in the quarter.
This was boosted by two Blackstone portfolio sales - Milestone ($3.8b) and Kingdom II ($825m). 
Rents in Tokyo dropped 6.5% while Osaka and Nagoya recorded only 2.2% and 0.6% declines, respectively.
Occupancy rate in the Raffles Place / Marina Bay precinct reached 94.3% in Q2.
One of the demand drivers were tenants seeking small spaces of less than 1,000sqm.
Hong Kong’s strong export rebound and rise in food consumption would increase this asset’s value.
Island-wide rents declined 9.3% to S$26.20 per square foot per month in Q2.
This is a huge improvement from the 28% drop recorded in 2020.
It is also important to consider who pays for the technology infrastructure, the occupier or the developer? 
The APAC Prime Office Rental Index declined by just 0.8% despite Delta variant outbreaks.