08 November 2017
The same question comes back every time we mention that we work in the real estate industry. “I hear leasing prices are going down, right?” We hear it over and over again and repeatedly say “No, they aren’t going down…..yet”. Hong Kong still has a surplus of demands versus availabilities in the major residential areas on the Island and in Kowloon, which means that if this continues, the leasing prices will not fluctuate much, especially in the mass market. Once you hit the HKD100,000 mark or above, this is the spot where landlords tend to be more flexible on negotiating their asking prices. However, many landlords prefer to keep the face value and include other benefits to reach the agreed leasing price. Leasing prices in popular buildings are still high between HKD38 – 45 per sq ft for the mass market. As soon as other features are included, such as terraces, roof tops, garden, pool, etc, the prices per sq ft can rise to HKD70 – 80 per sq ft. For the new developments on the Island it’s another story; asking prices per sq ft can rise to HKD65 – 85 per sq ft with lower efficiency but with better finishes, features and facilities.
A recent UBS report stated that Hong Kong was the most expensive city in the world with an average of 150 sq ft of living space among 20 global cities including New York, London, Tokyo and Paris. Entry price in Hong Kong is so high that residential premises cannot be offered for lower rents, at least not for a while.
It is still very common for expat tenants to move into new premises every two years, either because of a rent increase or personal circumstances or even just for a change of scenery. However, lately we have seen a real trend of non-movers, with tenants choosing to renew their leases. Why? Two major factors: 1. Tenants realise that they can’t find a better option; 2. an apartment or a house can create much more personal attachments toward the tenant than an office.
The influx of expatriates into Hong Kong has slowed down, companies are less inclined to offer full expat packages to individual and families. This factor is not completely new, however it is starting to drive some landlords to maintain their premises in a better condition or even to consider refurbishing them completely. This allows them to be more competitive against new developments, and to retain or attract tenants without driving rental prices down.
The question whether to lease or buy an apartment is a very common dilemma for anyone who spends more than five years in Hong Kong. For expat individuals or families, passing the 5-year crossroad means a few things: 1. They are staying for at least another two years to be eligible for permanent residency; 2. they should start weighing the options of buying or continuing to rent a property; 3. it’s time to move on.