Landlords were not keen to cut asking rents.
Whilst recording smaller rentals from Q3, luxury apartment rents continued to post a downward growth in Q4 2019, according to a Savills report. Rentals in New Territories recorded the largest fall at 1%. Hong Kong Island rents similarly declined 0.5%, whilst, rents in Kowloon were down 0.8%.
During the whole of 2019, Hong Kong Island rents fell by 2.1%, the lowest since 2014. Kowloon and the New Territories also posted an 11-year low in 2019, with rents dropping by 5.6% and 6.0% respectively.
Savills believes that the slide in rents can be attributed to landlords’ hesitance to cut asking rents. Landlords maintained asking rents of $60,000 to $90,000 per month, moving rental activity in the mid-segment type.
Expats continued to arrive in modest numbers and were mostly employed by finance and professional services firms.
PRC demand on the other hand, has pulled back but remains focused on the Peak and Southside districts, preferring new developments with good views and high design standards, noted Savills.
With luxury prices up over 180% from their low point in 2009, and with price-to-income affordability at historical highs, locals remain active in the leasing market, priced out or waiting for a correction in the sales market, read the report.
However, given the prevailing negative real interest rates and a tight pipeline of new supply, it is difficult to see a major adjustment in values, although some near term weakness can be expected, stated Savills.
Although townhouse rents demonstrated a consecutive decline for three quarters, with Q4 recording a 0.9% fall, it was the only sector that saw a rental increase for the whole of 2019. Full-year townhouse rents nudged up marginally by 0.2% in 2019.
Meanwhile on a quarterly basis, Peak and Southside townhouse rents slipped by 0.7% and 1.0%, respectively.
Rents of serviced apartments sank by 6.4% over the quarter. Over the year as a whole, rents dropped by 12.3% and average occupancy rate plunged from 88.8% to 71.2%.
Savills notes that there were not many newcomers in the final months of the year and many job contracts were either being suspended, or pending review following the Lunar New Year.
Looking ahead to 2020, Savills expects to see further falls in luxury rents of 5% to 10% in Hong Kong Island and 10 to 15% in Kowloon and the New Territories.
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