HONG KONG (Reuters) – Some Hong Kong developers are now turning to housing rental and the leasing market to weather a prolonged downturn in its property market and to serve surging rental demand from mainland Chinese professionals and students.
The shift in developers’ strategy is a rare move in a city that boasts some of the world’s highest property prices and underscores the changing demographics in Hong Kong.
The former British colony had seen an exodus of residents including expatriates after anti-government protests in 2019 and then the pandemic, with the population gap now largely filled by an influx of mainland Chinese following a range of talent admission schemes launched in 2022.
Rents of private homes in Hong Kong in July rose to their highest level in nearly five years, while home prices dropped 22% during the same period, latest data showed on Wednesday.
With locals also opting to rent rather than buy due to an uncertain economic outlook, many realtors expect the diverging trend of home prices and rents to continue in the near term.
Earlier this month, Henderson Land (OTC:HLDCY), a major Hong Kong developer, said it was putting part of its “Baker Circle Dover (NYSE:DOV)” project in the Kowloon peninsula up for rent instead of sale.
It did not disclose how many units are available for rents but said more than 20 units were leased out within one week, with monthly rents ranging from around HK$14,000 ($1,795) for a studio to HK$19,000 for a one-bedroom flat.
Traditionally, developers usually put up all their flats for sale in a residential development.
“Prompted by the government’s various measures on talent attraction, demand in residential leasing market has surged,” Henderson said in a statement. “(Hence we are using) part of the previous launches to respond to the market.”
Its smaller peer Chevalier International also announced earlier this month that it would save all 58 flats in a new building in a neighbouring district for rental to meet demand.
Such projects come as the city has approved 210,000 applications under its talent schemes launched two years ago. One of its schemes gives graduates from the world’s top 100 universities or those earning annual income of at least HK$2.5 million a 24-month visa to stay in Hong Kong.
Of those approved, 140,000 have already arrived in Hong Kong, according to its chief executive John Lee this week, and property market experts estimate the majority of them are from mainland China.
STUDENT HOUSING
Property investors are also increasingly turning to the rental market, refurbishing various real estates including hotels, commercial and residential buildings for student housing, realtors said.
“There is more demand for student housing now because the (foreign student) quota has increased, and also many mainland Chinese are not able to get a mortgage loan for an apartment,” said Raymond Lee, real estate consultancy Savills’ Greater China CEO.
The Hong Kong government announced last year that from the 2024 academic year, the quota for non-local students in the eight universities would be doubled to 40% of admissions.
Hong Kong has seen at least three property deals over the last two months aimed at meeting growing demand from students.
The Hong Kong Metropolitan University in June bought a newly completed hotel with 255 rooms in Hung Hom for HK$1 billion for use as a student dormitory, the largest student housing deal so far.
While Lee cautioned rents for student housing market could drop longer term if supply grows quickly, students are willing to pay an increase for fear of being priced out.
“I’m glad I got the new lease in June, which is HK$500 more expensive per head than my previous flat,” said Julia Zhong, a student from the northeastern Chinese city of Shenyang who recently moved into a two-bedroom flat close to the University of Hong Kong and shares it with her flatmate.
“I heard the rents have got much more expensive in July and August.”
($ = 7.7985 Hong Kong dollars)
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