Expatriates fueling luxury leasing market in Hong Kong

Expatriates with families, arriving in town prior to the start of the new school year in September, are fueling luxury residential leasing demand in Hong Kong, according to new research from Savills Hong Kong.

Southside, with more choices of private or international schools, is a favoured location with rents up by 4.6 per cent over the quarter, the report discovered.

The second quarter is a traditional seasonal peak for Hong Kong’s luxury residential leasing market, as expatriate families arrive in town prior to the start of the new school year in September. More arrivals of senior expatriates, such as regional heads or heads of division, have been noted this summer. Availability of super luxury properties for this group of high-budget staff diminished rapidly and drove townhouse rents up by 3.4 per cent over the quarter.

Average rents of luxury apartments on Hong Kong Island also grew moderately by 2.3 per cent over the same period. Some popular corporate housing developments, such as The Repulse Bay, reported almost full occupancy at the end of June and registered double-digit rental increments over the quarter.

Island South, with more choices of private or international schools, remains a favoured housing locality for the expatriate community. Average rents of luxury apartments and townhouses in Southside were up by 4.6 and 3.9 per cent over the quarter, respectively, outstripping the overall market. Luxury apartment rents elsewhere on Hong Kong Island rose by 0.3 per cent in Pokfulam and by 4.4 per cent in Happy Valley / Jardine’s Lookout.

Discovery Bay continues to gain in popularity with expatriate families looking for more space and a higher quality living environment. The rental differential between Discovery Bay and traditional luxury districts on Hong Kong Island has narrowed in recent years, however, with the average discount falling from 47 per cent to 36 per cent over the past three years. Moreover, more properties
previously rented have been sold to end users, resulting in less supply in the leasing market, driving rents up.

Low-rise units and garden houses are the most popular housing types in Discovery Bay with rents up by 5 to 14 per cent over Q2 2010 alone. After rising by more than 32 per cent from Q2 2009, rental growth of luxury apartments in Tsimshatsui / Hunghom slowed to 0.7 per cent in Q2 2010. Whereas West Kowloon is becoming a popular district for young professionals working in the International Commerce Centre (ICC), limited provision of amenities such as international schools and sports clubs in the district means that the area holds less appeal for executive expatriates and their families.

Average achievable rents in most of the properties in West Kowloon have remained static over the past month.