Mainland Influx Sustains Hong Kong Luxury Apartment Rents

Hong Kong’s luxury residential rents saw modest signs of a rally in the second quarter as the fifth wave of COVID-19 receded and tenants from mainland China drove the city’s high-end leasing market, according to Savills.

Luxury rents on Hong Kong Island recorded growth of 1 percent from the preceding three months, rebounding from a 2.6 percent decline in the first quarter, the property consultancy said in its latest residential leasing report. Luxury rents in Kowloon swung to a 2.5 percent gain after a first-quarter plunge of 3.7 percent, and those in the New Territories eked out a 0.5 percent rise after diving 4 percent to start the year.

COVID lockdowns in Shanghai and other mainland cities have prompted many mainlanders to look at Hong Kong or further overseas to avoid confinement, the report said.

“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,” said Simon Smith, regional head of research and consultancy for Asia Pacific at Savills.

Peak Perks Up

Hong Kong Island’s rent increases in the second quarter were led by a 2.5 percent surge in The Peak, followed by Mid-Levels (up 2.4 percent) and Southside (up 1.2 percent), Savills said.

The pattern shows a preference for high-quality, prestigious developments with harbour and city views among returning mainlanders and so-called new Hongkongers — those who have lived in the territory for seven straight years and have become permanent residents.

Luxury rents in Kowloon and the New Territories were paced by a 3.5 percent jump in Sha Tin/Tai Po, with smaller increases in Ho Man Tin/Kowloon Tong (up 2.8 percent), Sai Kung (up 2.5 percent) and Tsim Sha Tsui/Hung Hom (up 2.2 percent).

Demand in those areas was fuelled by competitive rents for houses — on the order of HK$45,000 ($5,733) per month — relative to apartment rents on Hong Kong Island, as well as the lure of decent schools with available places and fresh air.

“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,” said Aradhana Khemaney, senior director and head of residential services at Savills Hong Kong. “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.”

Discovering the Exit

On the downside, luxury rents in Discovery Bay sank 3.5 percent in the second quarter against the backdrop of an expat exodus and crumbling airline-related activity, while Happy Valley/Jardine’s Lookout (down 2.1 percent) and Pok Fu Lam (down 1.6 percent) also saw demand weaken.

The European Chamber of Commerce in Hong Kong revealed in March that nearly half of its member firms planned to fully or partially relocate out of the city within a year’s time. Bloomberg reported that a net 71,000 people left Hong Kong in February, the biggest outflow since the pandemic began, with many of them ending up in Singapore.

Serviced apartments, a favourite of young professionals, got a boost from mainland graduates finding work with banks, asset managers and law firms. Rents in the segment rose 1.5 percent in the second quarter after tumbling 3.8 percent in the previous three months, with availability in the HK$20,000-HK$30,000 bracket particularly tight, Savills said.

Townhouse rents climbed 1.5 percent in the quarter, led by a 1.7 percent advance in Southside and a 1.2 percent increase on The Peak. Key deals included the letting of a five-bedroom house at King’s Court on The Peak to a mainlander for a monthly rent of HK$210,000.