Hong Kong Property - what next for rents?

Lots of discussion here about what next for HK property prices - particularly in the aftermath of further cooling measures and the impact of the new non-resident 15% purchase tax. I dont want to repeat or replicate that discussion - rather I'd like for us to focus on what these changes mean for rents.


My own view is as follows. Rental market has been mixed between luxury segment (slightly down year to date) and mass market (up).


Mass market is broadly reflecting general inflation and scarcity of supply whilst luxury has been hit by slowdown in financial sector and China overspill.


Latest colling measures will severly restrict transactions in the secondary market, affect land sales for the time being and force developers to accept less for apartments in the primary market. This may be a 3-6 six month impact or perhaps something longer but short term we may see a sustained fall in prices. My money is on negiglible change over the next year with a dip for the next 6 months.


On rental side the short to medium term dip in sales transactions could lead to more rental demand from expats & PRC nationals who are less likely to buy and more likely to rent given personal retrictions and also FTBs who may wait and see how far prices slip back thereby also adding to the rental demand. Providing the economy does not tank from here this could fuel rental demand (a bit like we have seen in London market albeit for different reasons) where rental demand from priced out buyers has been strong. I suppose if prices fell back far enough some of these may seek to buy but with SSD, purchase tax and high LTV's wanting to buy and actually buying are two very different things.


On the supply side I dont see a large new stock of property coming on stream in the luxury segment nor apart from New territories in the mass segment - at least not yet. Developers wont be keen to start projects given the latest uncertainty so pipeline of projects may well fall back at least for next six months or so.


So if rental demand rises, sales transactions fall and supply either falls or is stagnant rents must be heading up providing some of Ed's worse case scenarios dont come to pass.


Welcome all views.

Crestrider

Well, that would certainly be good news for small scale landlords like myself.


The description you provide may well come to pass but in the interests of playing devil's advocate, it's also worth remembering that (i) overall housing supply to the market is increasing and some of that will filter through to the rental market and (ii) there have been a lot of lay offs in the banking and fund management industries in recent months (with more expected) with consequential impact on related industries (e.g. a number of law firms have cut staff).


FWIW, two months ago I got a rent increase on one of my properties. I have another tenant moving out before year end so it will be interesting to see what rent the new tenant will pay.

The premium for new properties (Over secondhand) has become "very fat and sassy" - maybe twice what it should be.


I reckon new properties will take the brunt of the correction : maybe -10%, and secondhand less, maybe up to -5%

"Posted by badseal (17 hrs ago)


It's pretty amazing how quickly prices have come down and it's not even a week yet. Time will tell who's right and who's head is in the clouds."

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Evidence for this?


Bids may be few and far between -- and LOWER.

But have sellers really cut their asking prices?

If so, why?


Probably, after a dip, the buyers will be right back in near the old prices.

That's what I expect in the secondary market, unless there is widespread damage to confidence... and/or if the banks cut their valuations dramatically, as they did in 2008.

As far as the secondary market is concerned, I agree that we will see less supply - people will not sell (especially non-PR holders because the HKSAR Govt has effectively told them not to buy back in). We will also see less demand but non-PR buying is commonly reported as being less significant than for the primary market.


For primary market sales, the pipeline of new supply is still there but at least some of the demand will have been taken out. I expect primary market prices to be more likely to be affected than secondary market prices. The developers may have to chose between cutting prices and sitting on stock for longer. Based on comments in the media so far, they are at least talking about holding prices (which is not surprising).

TI's:

"As far as the secondary market is concerned, I agree that we will see less supply - people will not sell (especially non-PR holders because the HKSAR Govt has effectively told them not to buy back in)."


Meantime... Rents go on rising steadily higher