The characteristics of Mainland rental demand became apparent in the second quarter as new builds and high-end renovations proved attractive while traditional core locations and sweeping city or harbour views also appealed, according to Savills in its Market in Minutes – Hong Kong Residential Leasing report for Q2 2022.
- Luxury apartment rents on Hong Kong Island recorded growth of 1.0%, while rents in Kowloon and the New Territories rose by 2.5% and 0.5% respectively
- Hong Kong's leasing market is increasingly being driven by Mainlanders and 'New Hongkongers', Mainlanders who have been living in Hong Kong for seven consecutive years and have become permanent residents
- Luxury rents by district presented a mixed picture in Q2/2022, with The Peak (+2.5%), Mid-Levels (+2.4%) and Southside (+1.2%) recording increments, while Happy Valley/Jardine’s Lookout (-2.1%) and Pokfulam (-1.6%) recorded declines over the quarter
- The serviced apartment market was given a boost by Mainland graduates who are being picked up in numbers by both PRC and international banks, asset managers and law firms. Availability in the HK$20,000 to HK$30,000 per month bracket is particularly tight.
Luxury rents largely recorded growth in Q2
Luxury residential rents saw some modest signs of a rally in Q2 as the fifth wave of Covid receded. Rents on Hong Kong Island recorded a marginal growth of 1.0%, in a mixed picture with The Peak (+2.5%), Mid-Levels (+2.4%) and Southside (+1.2%) recording increments – supported by returning Mainlanders and 'New Hongkongers' who prefer the high quality, prestigious new or renovated developments that come with spectacular harbour and city views – while Happy Valley/Jardine's Lookout (-2.1%) and Pokfulam (-1.6%) recorded declines over the quarter.
Rents on Kowloon and New Territories hold better
Luxury rents in Kowloon and the New Territories rose by 2.5% and 0.5% respectively, with Sha Tin/Tai Po (+3.5%), Ho Man Tin/Kowloon Tong (+2.8%), Sai Kung (+2.5%), Tsim Sha Tsui/Hung Hom (+2.2%), rebounding from the previous quarter driven by Mainlanders and demand from locals and expats attracted by competitive rents for houses (HK$45,000/month) compared with apartment rents on the Island. Decent schools with available places and fresh air are also a draw (Sai Kung, Shatin/Tai Po, Ho Man Tin/Kowloon Tong). Rents in Discovery Bay (-3.5%) remain soft as expatriates continue to leave the city and airline-related demand has fallen heavily as housing budgets have been cut.
Townhouse rents hold firm
Townhouse rents rose by 1.5% over the quarter, with a 1.2% increase on the Peak and a 1.7% increase recorded in Southside. Major deals included the successful letting two months after launch of a five-bed house at King’s Court on the Peak which was leased to a Mainlander for a monthly rent of around HK$210,000 in June.
Mainland's young professionals support the demand of serviced apartments
Rents for hotel-like and apartment-like units rose by 0.4% and 4.4% respectively. Availability is particularly tight in the HK$20,000 to HK$30,000/month bracket while the premium apartments are maintaining competitive rates in order to increase occupancy.
Demand is being driven by young professionals from the Mainland looking for Hong Kong Island serviced apartments close to the CBD. As a result, the overall serviced apartment occupancy rate rebounded from 58.6% in Q1/2022 to 62% this quarter. We note that Mainland graduates are being picked up in numbers by both PRC and international banks, asset managers and law firms.
Mr. Simon Smith, Regional Head of Research & Consultancy, Asia Pacific of Savills commented: "Having anticipated rental declines in the second quarter, it has come as a surprise that Mainland demand has promoted modest gains in some districts even as expats have largely stayed away."
Ms. Aradhana Khemaney, Senior Director, Head of Residential Services of Savills said: "The two travel schemes launched by the Hong Kong Government last year, Come2hk and Return2hk, allow Mainlanders and 'New Hongkongers' to travel to Hong Kong without compulsory quarantine under certain conditions. The policy has driven professionals and wealthier families seeking to rent luxury apartments in Hong Kong prior to their arrival in the city as a permanent address is required."