Prominent real estate advisor Savills pointed out that luxury apartment rents in Hong Kong Island, Kowloon and the New Territories slumped by 6.1%, 7.4% and 4.5% respectively over the first quarter of 2020.
- Kowloon recorded the largest rental fall among all regions in Q1/2020
- Company landlords still have strong holding power but rent-free periods are seen
- PRC demand is down around 80% from last year while expat activity has also fallen heavily
Prominent real estate advisor Savills pointed out that luxury apartment rents in Hong Kong Island, Kowloon and the New Territories slumped by 6.1%, 7.4% and 4.5% respectively over the first quarter of 2020. All these three districts recorded their worst quarterly performance since 2010. Compared to Q1/2019 when the market began to turn down, luxury rents have fallen by around 10% or more.
In traditional luxury districts on Hong Kong island (Peak, Southside and Mid-levels), rents have held up slightly better than elsewhere. Areas such as Kowloon Station and Olympic Station have been hardest hit by the lack of PRC demand and rents in these locations are off by nearer 10%.
Townhouse rents performed best among all residential leasing sectors, recording a fall of 4.7% over the quarter. Corporate landlords can still afford to be selective in looking for tenants with a good covenant. While Serviced apartments experienced another challenging quarter, posting a rental decrease of 9.4%. Average occupancy rates reached 50% to 60% while prime blocks which have secured long-term leases with tenants remained 80% let.
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “Most districts are seeing little demand in or out, and what activity there is relates mostly to downsizing as employment prospects dim. The shape of any rebound in residential rents will depend on corporate prospects in the second half and the rate at which the local economy rebounds. With so many uncertainties this is too tough to call.
Ms. Hatty Ng, Director, Residential Services said: “Given the damage being done to business prospects, many companies are cutting costs and reviewing headcount, and this has now extended to financial and professional services, traditionally a strong demand driver for luxury residential apartments.”
Ms. Teresa Chan, Associate Director, Residential Leasing said: “Leasing transaction volumes have dropped as economic activity is being widely disrupted. Whether this is a temporary hiatus or a longer-term trend is for landlords to grapple with but the lack of demand looks set to continue into the second quarter and rents are expected to consolidate further.”