Luxury apartment market losing tenants

Monthly rents for a house on Hong Kong Island’s south side go for HK$125,000 a month.

The culprit is Hong Kong’s pricey luxury-apartment market, whose sky high rents have become a definite disadvantage as companies pull back to cope with the global financial crisis with measures that include firing staff. Crown Relocations, a local moving company, said the number of people it is moving into Hong Kong this year is down by about a quarter from a year ago, while the number moving out is up by about a quarter.

The retreat has become more apparent in this summer’s peak season when new expatriate hires shop for homes before they bring their families from overseas. Crown Relocations reports that demand from high-end tenants such as bankers have been disappointing. Other brokers expect the market to deteriorate further as the year goes on.

Real-estate brokerage Colliers said its clients shopping for lodgings this year haven’t included many bankers. Companies outside the finance sector have continued to bring in expatriates, but their housing budgets haven’t equaled those from the finance sector.

That could be because monthly rents for a house on Hong Kong Island’s south side go for HK$125,000 a month while those in the affluent Peak neighborhood cost at least HK$185,000, according to brokers.

For large apartments (or those with an area of 1,080 square feet to 1,720 square feet) on Hong Kong Island, rents in June were down 5% from a year earlier, to HK$386 per square foot, according to the government.

Rents for smaller apartments have been rising and government data shows that small 430 square foot apartments rented for 2% more in June than the year earlier.

One broker noted that persons who would have rented apartments costing over HK$100,000 now rent apartments that cost HK$60,000 to HK$80,000.

“Landlords are keeping their asking price but are more willing to negotiate now,” said Patrick Lam, District Associate Director of Centaline Property Agency.

The price reductions, however, have been modest and although things might be slightly more favorable to renters, it’s still a landlord’s market.