The residential leasing market in Hong Kong remained largely stable in the first quarter of 2015 but is experiencing low demand and slow take-up, according to a new research report.
Average luxury apartment rents have now bottomed out, and the vacancy rate has fallen to a new low, the latest residential leasing report from Savills World Research.
It shows that rents on Hong Kong Island rose by 2% in the first quarter of the year amid the bottoming out of luxury rents. Leasing was mainly active in the rental range of
HK$50,000 to HK$80,000 per month.
Townhouse rents also stabilised, down about 30% since their peak in 2011, with fewer vacancies and the report says that landlords have been very flexible in terms of lease renewal and are generally not willing to let units stand vacant.
‘Whilst this has attracted some new tenants to the townhouse market, few transactions have been reported and leasing volumes in the townhouse market remain thin,’ said Simon Smith, senior director for Savills Asia Pacific.
The report suggests that leasing activity has been driven by a variety of sectors setting up new or additional offices in Hong Kong, mainly in retail and IT services. ‘Landlords are utilizing the stable rental renewal growth rate in prime areas to maintain occupancy levels,’ added Smith.
On the demand side, Savills does not note any large expansion from the financial sector, where demand is largely flat, however, the report says that some new small to medium sized
financial tenants have set up office in Hong Kong, which increases slightly the demand in the leasing market.
New residential developments, such as Azura in Mid-Levels, are gradually entering the market for lease which the report says will gradually help to ease the tight stock situation.
In Kowloon, rents are supported by local families who are looking to traditional districts such as Kowloon Station and Kowloon Tong. Vacancy rates in these traditional areas are also falling as vacancies are being filled quickly. Indeed, rents in Kowloon rose by 4.5%.
‘Looking ahead, we expect that the leasing market has now bottomed out, and luxury apartment rents are likely to see 0% to 5% growth in 2015, supported by tighter availability,’ said Smith.
The report also says that in the serviced apartment market occupancy is rising alongside tightening vacancy rates in the luxury leasing market. Rents for serviced apartments rose by around 2% in the first quarter of 2015.
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Source: Property News Spain