Luxury rents in Hong Kong to fall further

Rents for luxury homes are expected to fall again by 4.2% in the second half of the year after plunging 7.5% in the first half.

Property broker Jones Lang Lasalle said part of the continuing slide is due to the souring economy as banks lay off high earners and international companies cut back on expatriate packages.

Multinationals have been cutting back on expensive expatriate packages and increasingly prefer to hire employees on local terms. With a company no longer paying expensive rents directly to a landlord, employees often opt to keep some of their allowance and make do with a smaller home.

Economic uncertainty has also hit demand for property in general, with transactions in the city down 25% in the first half of 2012 compared the same period the year before.

"You will see a dramatic stop in growth in luxury capital values," said Joseph Tsang, Hong Kong managing director for Jones Lang LaSalle said.

He predicted at most a 2% increase in values for the second half of the year as potential customers will wait and see.

Despite the economic slowdown, property prices rose 9% in the first half of the year increasing prices by some 50% compared to the start of 2009. Luxury homes showed the fastest gains with mainland buyers comprising a quarter of the purchasers for new properties and luxury homes.

The continuous rise in property prices has placed land out of the reach of more residents forcing the government to increase the land supply for housing to make housing more affordable.