Luxury Residential Rents Present Mixed Picture in Q3

• The luxury leasing market presented a mixed picture during Q3, with rents on Hong Kong Island recording a rise of 1.0%, while Kowloon and the New Territories decline slightly by 0.1% and 0.8% respectively
• All districts on Hong Kong Island recorded moderate rental increments in Q3/2021, led by Southside (1.4%), followed by Happy Valley/ Jardine’s Lookout (1.2%) and Pokfulam (0.9%)
• The luxury apartment market on Hong Kong Island is facing very limited availability especially in the townhouse segment in the Peak and Southside districts, as townhouse rents registered a rental increase of 1.1% over Q3
• All submarkets in Kowloon and the New Territories recorded slight rental declines except Ho Man Tin/ Kowloon Tong (+0.8%) and Sha Tin/ Tai Po (+0.2%)
• In Kowloon and the New Territories, luxury leasing markets have remained weak with fewer expat family arrivals and therefore lower demand for areas close to international schools
• Serviced apartment rents have stabilized from the last quarter with an overall 0.4% increase in Q3. 

Rental increase on Hong Kong Island amid tight availability

All districts on Hong Kong Island recorded moderate rental increments in Q3/2021, led by Southside (1.4%), Happy Valley/ Jardine's Lookout (1.2%) and Pokfulam (0.9%) in the order. Hong Kong's IPO pipeline remains healthy, the unemployment rate in the financing, insurance, real estate, professional and business services industry fell to a one-year low of 3.7% in August, while Central office vacancy stabilized; all factors behind the slight rise in residential rents on the island.

The luxury apartment market on Hong Kong Island is facing very limited availability and this is especially true for budgets of HK$70,000 per month plus in Mid-levels, while Pokfulam also remains tight. With more singles and young couples looking for apartments, Kennedy Town has attracted a lot of interest for its new stock of buildings and its vibrant bar and restaurant scene.

Kowloon and the New Territories submarkets hit by fewer expat family demand

Meanwhile, all submarkets in Kowloon and the New Territories recorded slight rental declines except Ho Man Tin/ Kowloon Tong (+0.8%) and Sha Tin/Tai Po (+0.2%) while submarkets remained strong along the new Tuen Ma Line which links East Kowloon and the New Territories. Ho Man Tin/ Kowloon Tong are proved to be popular among locals and Mainlanders who vied for the district's peaceful ambience, convenient access to core Kowloon areas and renowned school network. Discovery Bay (-2.2%) saw the largest rental decline among the submarkets in Kowloon and the New Territories, followed by the New Territories overall (-0.8%) and Tsim Sha Tsui/ Hung Hom (-0.5%).

In Kowloon and the New Territories, luxury leasing markets have remained weak with fewer expat family arrivals and therefore lower demand for areas close to international schools. Despite that, we have seen many more French families arriving recently. Usually working in finance and on budgets of HK$60,000 to HK$100,000 per month, they prefer Southside or Clearwater Bay/ Sai Kung. Their district preferences are explained by the fact that French schools are located in Jardine's Lookout, Happy Valley and Tseung Kwan O.

Townhouse rents rose on limited availability

Townhouse rents registered a rental increase of 1.1% over the quarter, up from an increase of 0.9% in Q2/2021. The availability of townhouses in the Peak and Southside districts is still limited, particularly older townhouses. During the quarter, several deals were inked at around HK$150,000 to HK$200,000 per month, mostly to Mainlanders. Despite the slight rebound over three consecutive quarters, townhouse rents remain low compared with their peak in Q1/2019.

Serviced apartment rents stabilized

In the serviced apartment sector, we are seeing more demand from Japanese tenants in Kowloon on budgets of HK$40,000 to HK$50,000 per month. There is plenty of competition for tenants and special promotions are not unusual, often offering studios or suites in the HK$20,000 to HK$40,000 per month range. Generally, occupancy levels showed a minor improvement over Q3. Serviced apartment rents have stabilized from the last quarter with an overall 0.4% increase, while rents for hotel-like units have fallen slightly (-0.5%). Apartment-like units recorded a mild increase of 1.9%. With their convenient locations near business districts and their affordable rents, local young professionals continue to take an interest in serviced accommodation.

Mr. Simon Smith, Regional Head of Research & Consultancy, Asia Pacific of Savills commented: "On-going rental weakness in the New Territories alongside more available school places suggests that we experienced a rise in departures at the end of the school year with fewer new family arrivals."

Ms. Aradhana Khemaney, Senior Director, Head of Residential Services of Savills said: "We note some upgrade demand while a trickle of new arrivals is also leaving quarantine to look for accommodation. Fewer families seem to be the norm with younger single executives or couples without children a stronger demand driver over this quarter."