Local demand becomes more important in HK luxury residential leasing marketBusiness | 8 Jul 2020 5:42 pm
Local demand has become a more important driver in the Hong Kong luxury residential leasing market over the second quarter as new mainland Chinese and expat demand has fallen heavily due to the cross-border restrictions, which require newcomers to self-quarantine for 14 days, says Savills Hong Kong.
Another reason is the worsening business environment which has seen downsizing and redundancies. As government departments have returned to work, working visa issuance has returned to normal, and a majority of the recent newcomers are from the US and Europe, working in the finance and I.T industries, the real estate services provider said.
Savills says it has not seen too many expats leaving town yet. Even though they may have been laid off, many have chosen to remain and renew with landlords on a month-to-month basis due to the quarantine hurdles they face in their home countries.
But Savills expect more expats to leave given the state of the global economy and the prospect of rising corporate insolvency, if the cross-border restrictions are loosened in the second half.
Corporate landlords are eager to keep tenants with a good covenant and are willing to negotiate. They prefer to stand firm on face rents but are prepared to offer rent-free periods to lower effective rents and ease the burden on tenants. Corporate landlords typically offer 1.5 to 2 months’ rent-free for a 2-year lease in today’s market, Savills says.
Meanwhile, there is a rise in the numbers of non-local employees being admitted via various admission schemes on lower budgets. Savills believes that this may result in more demand for smaller accommodations, such as co-living environments and more traditional serviced apartments in Kowloon and the New Territories, with lower lump-sum budgets over the coming years.
Aradhana Khemaney, head of residential services says, “Luxury rents appear to have stabilized for now as the market exists in a suspended state with travel restrictions still in place and many corporates still unsure of future prospects.”