These groups drive demand in Hong Kong’s luxury residential markets

Japanese expats favour West Kowloon whilst Mainland students dominate Hung Hom.

Rental demand in Hong Kong’s luxury leasing market is still being driven by Mainlanders moving to Hong Kong amid the sporadic lockdowns across cities in China. 

According to Savills, luxury residential rents have continued to rebound slightly as the city began to mandate a “3+4” hotel quarantine measure in August with a further relaxation in late September to “0+3” while the local epidemic situation has remained broadly contained. Luxury rents on Hong Kong Island recorded a marginal growth of 1.2%, while rents in Kowloon and the New Territories rose by 1.9% and 0.5% respectively.

Here’s more from Savills:

Luxury rents on Hong Kong Island all recorded positive increments in Q3/2022, with Mid-Levels (+0.6%), Pokfulam (+0.6%), Happy Valley/Jardine’s Lookout (+3.2%), Southside (+1.9%) all posting modest growth. 

Demand is being driven mostly by Mainlanders whose focus is on traditional luxury enclaves such as Southside, The Peak and Mid-Levels. Elsewhere, a lack of available stock is helping to support rents and a tendency to renew has resulted in a general lack of movement. In contrast to the luxury markets, rents in the larger housing estates such as Taikoo Shing and Kornhill are falling as the exodus of local professionals overseas has pushed up vacancy.

In Kowloon and the New Territories, luxury apartments generally recorded modest growth over the quarter, with Tsim Sha Tsui/ Hung Hom (+1.8%), Ho Man Tin/Kowloon Tong (2.2%), Sai Kung (+2.2%), Sha Tin/Tai Po (+2.1%), except for Discovery Bay (-2.0%). 

PRC students are stimulating demand for shared flats in areas like Hung Hom and Ho Man Tin while Japanese expats continue to favour West Kowloon. Heavy rental declines have been recorded in Discovery Bay as airline housing budgets have fallen dramatically. Pilots on allowances of HK$33,000 per month are often choosing to top up to HK$40,000 to HK$60,000 if they have families and require the extra space.

We have noted more activity in Tseung Kwan O recently. The area has traditionally been popular among Mainlanders, but the French International School is also proving a draw for French nationals. The area offers good value for money (a furnished 3-bed unit with sea views and good facilities can be rented for HK$45,000 per month), some terrific shopping malls such as PopCorn and The LOHAS, with improving connectivity via new transport infrastructure some of which is still under construction. The Tseung Kwan O – Lam Tin Tunnel and the Cross Bay Link connecting Tseung Kwan O Industrial Estate and LOHAS Park are expected to be completed at the end of this year. 

Townhouse rents rose by 2.5% over the quarter, with a 1.9% growth on the Peak and a 2.7% growth recorded in Southside. Supply remained incredibly tight and market movement has been limited.