Betting on Chinese demand, Hong Kong developers turn to rental market

Henderson Land Development Co

28/08/2024 09:00

* 
      Mainland Chinese professionals, students stoke rental
demand
    

        * 
      Home rents rise to near 5-year high while prices drop 22%
    

        * 
      Henderson, Chevalier turn to rental from sale this month
    

        * 
      Growing investor interest in student housing
    

  
    By Clare Jim
       HONG KONG, Aug 28 (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  0012.HK , a major Hong
Kong developer, said it was putting part of its "Baker Circle
Dover" 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  0025.HK  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)

 (Reporting by Clare Jim; Additional reporting by Marcus Lum;
Editing by Miyoung Kim and Shri Navaratnam)
 ((clare.jim@thomsonreuters.com;))