Hong Kong Island, Kowloon, and New Territories’ rents fell by 1.0%, 0.8%, and 2.5% respectively.
Luxury residential rates fell 1.0% in Q2 to reverse nine consecutive quarters of expansion.
Shrinking expat demand released more available homes to the market, which may have prompted lower leasing costs.
Mainland Chinese and locals now dominate the leasing activity over expats. The two groups are reportedly expressing the most interest for units between $70,000 and $100,000 among these two groups.
A report by Savills noted that all sub-markets on Hong Kong Island experienced rental declines over the period, with rents in Pokfulam reporting the sharpest decline at 1.8%. This is followed by The Peak (-1.1%), Mid-Levels (-0.8%), Happy Valley / Jardines’ Lookout (-0.6%) and Southside/ Shouson Hill (-0.4%).
Accordingly, rents in Tsim Sha Tsui/Hung Hom and Ho Man Tin/Kowloon Tong also dropped by 0.9% and 0.3% respectively. Discovery Bay recorded the largest rental decline amongst the New Territories sub-markets, with a 3.6% rental decrease over the quarter whilst Sai Kung and Shatin/Tai Po were down by 2.4% and 1.3% respectively.
The report also noted that serviced apartment rents declined by 2.2% over the quarter. The rise of the unemployment rate in the finance insurance real estate and business services (FIREBS) sector reportedly contributed to the decreasing occupancy rates of serviced apartments in the quarter. FIREBS’ unemployment rate rose to 2.4% in May from 2.1% in March.
However, vacancy rates remained low as landlords were reportedly eager to keep tenants, preferring to renew leases on similar terms rather than over asking.
The decline of Expat demand has caused more places to become available. Savills shared that some international schools were reportedly struggling to places due to their high tuition rates, which local families often cannot afford.
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