Rents for residential property in Hong Kong will continue to decline over the next few months as a weakening economy raises concerns over employment, market observers said.
The average rent fell 1.6 per cent last month from a year earlier to HK$36 (US$4.6) per square foot " the lowest since May, according to data from Centaline Property Agency on Wednesday.
Between August and November, rents fell by 5 per cent as the anti-government protests escalated and the city's economy entered a technical recession, said Wong Leung-sing, senior research director at Centaline.
"People don't want to pay too much on rent," said Wong, adding that people were looking to cut down on their rental expenses by moving into cheaper neighbourhoods or smaller flats.
Hong Kong's luxury flat rentals extend drop in third quarter
On Monday, the Hong Kong Retail Management Association warned the struggling retail sector could see at least 5,600 job losses and 7,000 company closures in the coming six months.
Wong said that rents would fall by another 1.1 per cent to HK$35.6 per sq ft next month as "winter is always a low season for the property leasing market". He also added that he does not expect Hong Kong's economy to recover until February.
Property agents said that in some areas the rent declines were much sharper. A 304 sq ft flat at City One Shatin was leased at HK$9,500 per month, falling below the HK$10,000 level for the first time in more than two years. At HK$31.3 per square foot, the rate is 13 per cent lower than the average for November.
Meanwhile, Hong Kong Property Agency said that a 1,105 sq ft sea view flat in Florient Rise in West Kowloon was let on Tuesday for HK$33,500 per month, or HK$31.8 per sq ft, 11.8 per cent lower than the landlord's asking price.
Among 10 major housing estates tracked by Centaline, rents at Kingswood Villas in Tin Shui Wai fell the most at 2.5 per cent, followed by Taikoo Shing in Quarry Bay at 2.3 per cent.
According to market observers, Hong Kong rents track home prices only to a certain extent. Prices of lived-in homes fell 1.3 per cent on average in October for a fifth straight month, according to an index compiled by the Rating and Valuation Department.
Buggle Lau, chief analyst at Midland Property, said that while the overall property market sentiment was not strong, rents will not decline much more in the coming months as landlords will not cut prices aggressively "unless the market situation deteriorates further".
Alvo To, vice-president at Cushman & Wakefield, said that if the uncertainty arising from the local political situation and trade talk hurdles continues, "we expect the impact on Hong Kong's economy will become more acute by mid-2020 [and] that will weigh on home sales volumes and pricing".
He predicted home prices could drop by another 10 per cent to 15 per cent in first half of next year depending on the state of the economy.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
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