The chill winds blasting through financial markets have hit rents for luxury properties in Hong Kong as banks lay off high earners and international companies cut back on expatriate packages, property brokerage Jones Lang LaSalle said on Monday.
With luxury homes costing HK$100 million ($15 million) or more, rental yields for high-end homes already yield less than 2 percent, a return set to dwindle further.
“Housing budgets have been cut, and companies are switching from corporate leases to personal leases, which will affect super luxury rents as well,” Marcos Chan, the company’s head of research for Hong Kong, told Reuters.
Hong Kong has the most expensive office and retail property in the world.
According to Knight Frank, only London’s Knightsbridge neighbourhood commands dearer rents than Hong Kong.
It costs $25,000 per month to house a CEO and his family in a 3,000-square-foot home in the city’s traditional luxury neighbourhoods, the Peak and the south side of Hong Kong island, the rival brokerage reported last week.
Housing the same family in a Knightsbridge costs $30,000 a month.
Jones Lang Lasalle, issuing a mid-year report on the state of Hong Kong’s property market, saw rentals at the luxury end falling 4.2 percent in the second half of 2012, after a 7.5 percent fall in the first half.
Multinationals have been cutting back on expensive expatriate packages and increasingly prefer to hire employees on local terms. With the 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.
The hard times in the financial sector is also seen reining in a runaway market. Hong Kong property prices have risen 9 percent in the first half of the year, to stand around 50 percent higher than they were at the start of 2009, with luxury homes showing the fastest gains.
Buyers from mainland China, loaded with cash made during boom times there, have supercharged Hong Kong’s property market. Brokers estimate that last year they made up one-quarter of the purchasers for new properties and luxury homes.
With prices moving out of reach for many residents, the city’s new leader, Leung Chun-ying, has pledged to increase supply and make housing more affordable.
Despite fears that Hong Kong has formed a housing bubble, home prices remain supported by record-low interest rates and the large amounts of equity that home owners have built up, leaving them with strong holding power.
Economic uncertainty has however hit demand, with transactions in the city down 25 percent 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,” Joseph Tsang, Hong Kong managing director for Jones Lang LaSalle, said, with at most a 2 percent increase in values for the second half of the year. “People will wait and see.”
Category: Hong Kong