Hong Kong Island’s luxury rental market slows down in Q1

The luxury residential segment on Hong Kong Island experienced a sluggish first quarter after rental rates fell by 4.1 percent as expats move away from the CBD. Partly caused by the curbing measures that are being implemented by the government, the decline is mainly attributed to the decreasing number of expats who have also reduced their housing budget in Hong Kong, the South China Morning Post reported. Expats are now exploring residential areas outside Central Hong Kong—such as Yuen Long, Fanling, Tai Hang, Tin Hau and Quarry Bay—in search for lower rent and better value for their money. “Major landlords have been quick to grasp the implications of ebbing leasing demand, and asking rents have dropped substantially, while aggressive rental discounts on renewal are being offered to maintain occupancy levels,” Simon Smith, head of research and consultancy services at Savills Hong Kong, told SCMP. Although they remain the most expensive in the world, rental rates in Hong Kong have dropped for an average of 5 percent annually in the last four years, and Savills forecasts that this trend may affect the market’s performance throughout 2014. Some insiders, however, believe that interest in luxury properties in Central Hong Kong remains strong. Local developer First Group recently acquired an existing property along Repulse Bay Road in the southern part of Hong Kong Island for HKD350 million (USD45.15 million), according to broker Knight Frank. The company announced plans to convert the property into a luxury residence within three or four years. Several developers are also preparing to bid this Friday for a luxury residential site in Shouson Hill, an upmarket neighbourhood on Hong Kong Island facing Deep Water Bay. With an estimated maximum value of HKD3.07 billion (USD396 million), the property is expected to attract many bids due to the scarcity of prime plots in high-end locations in Hong Kong. “There have been few luxury sites available for sale in recent years,” Vincent Cheung Kiu-cho, national director for Greater China at Cushman and Wakefield, told SCMP. “I’m optimistic about the tendering for this site.”   Hong Kong Island by WiNG was used under a Creative Commons licence.