Expectation of continued transition from expatriates to Mainland tenants throughout 2024 and shift within expatriate population from the US/Europe to Asia, according to Savills in its Market in Minutes – Hong Kong Residential Leasing report of May 2024.
- Transition from expats to Mainland tenants expected to continue in 2024.
- Overall rental indices see slight growth of 0.1%-1% except luxury apartments in Hong Kong Island.
- Slow return of expatriates impacts luxury residential leasing market.
- No new local demand was observed while new Mainland tenants actively sought mid-range properties in new developments with pre-installed furnishings and convenient locations.
Subdued performance in luxury residential leasing
The luxury residential leasing market in Q1/2024 experienced a subdued performance due to the slow return of expatriates and layoffs in investment banks, which further dampened market sentiment. However, However, rental indices for various districts have only shown a slight variation of -1% to 1% on a quarterly basis.
Southeast Asian expatriates, local transfers, and Mainland tenants shape the residential leasing market
The expatriates who were seeking new homes in Hong Kong mainly originated from Southeast Asia and had mid-range budgets ranging from HK$40,000 to HK$80,000.
The tenant segments of local and Mainland tenants were the most active during the quarter, each with its own characteristics. Existing local tenants primarily sought apartment transfers or downgraded to less desirable locations while maintaining similar budgets. However, no significant increase in local demand was observed. On the other hand, Mainland tenants, including newcomers, had mid-range budgets ranging from HK$40,000 to HK$50,000 and actively sought new developments with pre-installed furnishings and convenient locations near Mass Transit Railway (MTR) stations. The majority of new Mainland tenants came from buy-side/fund houses or the trading industry.
Limited availability of high-budget properties
The limited availability of high-budget properties was another notable trend during the quarter. There were very few apartments/houses priced over HK$200,000 on the market, and high-budget properties exceeding HK$500,000 were quickly rented by Mainland senior executives. As a result, luxury residential rents remained relatively stable.
Over half of the Mainland talents under Top Talent Pass Scheme opt for co-living and low-budget apartments
According to government survey, over half of the Mainland talents who arrived in Hong Kong through the Top Talent Pass Scheme (TTPS) secured employment with a median income of HK$50,000. Many of these individuals, primarily singles or couples, initially settled in co-living apartments or low-budget apartments with lease terms ranging from 6 months to 1 year and budgets around HK$10,000 to HK$15,000.
Mr. Jack Tong, Director, Research & Consultancy of Savills commented, “Structural shift of tenant profile is likely to continue in 2024 with a transition from expats to Mainland tenants, and both corporate and individual landlords should be well prepared for this change.”
Ms. Sdever Li, Director, Residential Services of Savills said, “Landlords are encouraged to adapt their fit-outs, service offerings, and budget expectations to attract and retain tenants amidst these changes.”