Layoffs of highly paid bankers are causing cracks in Hong Kong’s luxury-apartment market, by some measures the world’s most expensive.
One of the city’s leading moving companies, Crown Relocations, reports the number of people it’s moving into Hong Kong this year is down by about a quarter from a year ago, while the number it’s moving out is up by about a quarter. The folks moving out have needed lots of cargo space, which the company has interpreted as meaning they’re mid- and senior-level executives, a spokeswoman said.
Every summer, in what’s dubbed “peak season,” Hong Kong’s new expatriate hires shop for accommodation before they bring their families from overseas for the new school term. Real-estate agents welcome these big spenders.
This year, however, the summer rush has been anything but: Demand from high-end tenants has been lackluster, according to brokers. Uncertainties in Western economies are trickling down to Asia, where financial firms have been cutting staff and making the accommodation allowances for high-ranking employees less generous.
Agents expect the market to quiet down further as the year draws to an end. That’s sapped demand for the city’s largest and best-located residences.
“Landlords are keeping their asking price but are more willing to negotiate now,” said Patrick Lam, Centaline Property Agency’s District Associate Director.
The rent drops so far in the high-end segment have been real, though modest beside the increases of previous years.
“Things may be shifting to be slightly more favorable to renters, but it’s still a landlord’s market,” said Edward Farrelly, Head of Research at CBRE.
For large apartments—1,080 square feet to 1,720 square feet—on Hong Kong Island, rents in June were down 5% from a year earlier, to 386 Hong Kong dollars (about US$50) per square foot, figures from the government’s Rating and Valuation Department show. But that’s after rents rose 50% between April 2009 and August 2011, when they hit a record high.
Rents for smaller apartments have kept climbing, according to the government figures. For instance, a diminutive, 430-square foot apartments rented for 2% more in June than the year earlier.
“Those who would’ve gone for apartments that cost more than HK$100,000 would now rent apartments that cost HK$60,000 to HK$80,000,” said Jackson Chiu, a manager at Land and Fortune Realty Limited.
Real-estate brokerage Colliers said in a report that its clients shopping for accommodation this year don’t include many bankers. Companies outside the finance sector have continued to bring in expatriates—but their housing budgets “have not yet matched those from the finance sector,” according to the Colliers research.
Monthly rents for a house on Hong Kong Island’s south side, which faces the sea, go for HK$125,000 a month (US$16,000) while those in the affluent Peak neighborhood cost at least HK$185,000, according to brokers and listings. For such pricey property, some landlords—especially corporate property owners with hundreds of apartments to lease—are offering inducements such as months of free rent.
Big landlords “can offer rent-free apartments, free car park spaces to attract tenants,” said Mr. Chiu, of Land and Fortune Realty.