Grim 4th quarter in Hong Kong’s residential leasing market as recession coincides with low season

Savills expects redundancies to arise in the coming months as businesses rely on government grants to keep themselves afloat 

Bird’s eye view of Hong Kong. leungchopan/Shutterstock

Property agents believe that the home rental market will face a rough fourth quarter as a commonly low season coincide with what is now the worst recession in decades, reported the South China Morning Post. 

Savills added that redundancies will occur in the coming six months, which will have clear ramifications on the local housing demand, as several businesses still depend on government funding to tread the waters. 

Thus far, the senior director of research and consultancy at Savills Simon Smith revealed that “the rental market still seems precariously balanced as tenants and landlords face uncertain prospects. We expect the final quarter of 2020 to present further challenges.” 

In the data published by the government’s Rating and Valuation Department, the rental index dropped by 9.2 percent from its peak in 2019. It also indicated that the monthly rents for apartments have been steadily declining. 

To increase demand, landlords have been providing incentives aside from rent reductions. 

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“Landlords and tenants are learning to navigate the current uncertainty with one-year leases, early handovers and rent-free periods,” said the head of residential services at Savills Aradhana Khemaney. “The fourth quarter is likely to see more challenges and we expect rents to soften further.” 

Moreover, Knight Frank said that they have witnessed more landlords who are inclined to offer incentives to draw in more tenants instead of reducing asking rent. 

“Prices will still be under pressure because of protracted unfavourable factors, including the weak economy and rising unemployment rate, which might erode affordability over time,” shared the associate director of research and consultancy in Greater China at Knight Frank Martin Wong. 

Fortunately, the overall property sector has started to regain its momentum, according to property agency Midland Realty. They predict the total property transaction volume, including homes, retail, parking spaces, commercial and industrial properties to reach 6,500 in September, a 20.6 percent increase from August.