• Kowloon (-3.6%) recorded the largest rental fall among all sub-markets in the third quarter
• Serviced apartment rents and occupancy rates slumped during the quarter as competition from hotels intensified
• Leasing demand from mainlanders and locals has held up reasonably well
Hong Kong – 28 Oct 2019 Prominent real estate advisor Savills pointed out that luxury apartment rents in Hong Kong Island, Kowloon and New Territories experienced falls which were larger than those of previous quarters, down by 1.6%, 3.6% and 3.1% respectively, compared to 1.0%, 0.8% and 2.5% in Q2/2019. There is a sense that continuing unrest will eventually impact Hong Kong’s appeal as an overseas posting, however, the finance and professional services sectors have so far experienced less disruption and tenant demand from this quarter remains firm for now.
Hong Kong Island recorded the largest rental falls since Q2/2014, with luxury rents dropping by 1.6% over the third quarter. In line with Q2/2019, all sub-markets on Hong Kong Island experienced falls, with The Peak (-2.3%) recording the greatest decline, followed by Pokfulam (-2.1%), Mid-Levels (-1.7%), Southside / Shouson Hill (-1.0%) and Happy Valley/Jardine’s Lookout (-0.9%). Sai Kung recorded the largest rental decline among the Kowloon and New Territories sub-markets, with a 4.9% rental decrease over the quarter, followed by Tsim Sha Tsui / Hung Hom (-4.1%) and Shatin / Tai Po (-2.6%). Both Discovery Bay and Ho Man Tin / Kowloon Tong recorded rental falls of 2.0% while rents in Kowloon and the New Territories fell by 3.6% and 3.1% respectively over the quarter.
Townhouse rents dropped by 2.2% in the third quarter, the largest fall since 2015. Peak and Southside townhouse rents were down by 1.8% and 2.4% respectively in Q3/2019.
The traditionally stable serviced apartment market saw rents fall by 4.3% while occupancy rates dropped below 80% over Q3. Many of Hong Kong’s premier serviced apartment brands – Rosewood, Parkview, Pacific Place and Four Seasons to name a few are all seeing vacancy rates creeping higher as a result. The market for budgets below HK$50,000 per month has been less affected.
Mr. Simon Smith, Senior Director, Research & Consultancy commented: “Luxury leasing demand has held up surprisingly well, but rents have begun to buckle nonetheless. Serviced apartments have been challenged hard by competitive hotel room rates at the top end. Singapore is seeing plenty of interest from Hong Kong but this has not yet translated into actual moves.”
Ms. Edina Wong, Senior Director, Residential Services said: “Even given the unstable political and macroeconomic environment, the FIREBS unemployment rate remained at 2.2% to 2.3% in the third quarter and rents have not yet recorded significant declines.”