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Cheryl Arcibal

Rents in Hong Kong are set to climb to a record high this year, surpassing the previous peak in August 2019, because of robust demand from newly arrived residents and prospective homebuyers currently sidelined by high mortgage rates, according to analysts.
With the rental home index in July rising by 1.1 per cent month on month to 194.1, the gauge is 6 points shy of the peak of 200.1 recorded in August 2019, according to official data.
More rent increases are in the offing, which could spur developers to shift their unsold flats to the leasing market instead of selling them, analysts said. In such an event, rents could go past the HK$21.30 (US$2.73) to HK$41.48 per square foot per month range reached five years ago.
“The current market conditions are clearly characterised by limited supply and robust leasing activity,” said Cathie Chung, senior director of research at JLL in Hong Kong.
The rental index will continue its upward trajectory throughout September and likely reach an all-time high this year, although the margin of increase may be modest, she added
Chung said that for the rental index to hit a record, it has to register a year-on-year jump of 8.2 per cent in August, an “optimistic” scenario but “not entirely implausible”. In July, rents surged 6.6 per cent year on year.
“With more international students renting units and a continuous influx of skilled professionals, rents are expected to further increase by 1.5 per cent in August and September, respectively,” said Derek Chan, head of research at Ricacorp Properties. “This could drive rents up by nearly 4.2 per cent in the third quarter.”

Chan said in the last three months of the year, rent increases were likely to moderate to 2 per cent, which would still be enough to push the annual gain to 9.5 per cent, taking the rental index past the previous high of 200.1. In 2023 the gauge rose to 186.0, following a 6 per cent increase in leasing costs.
As of July, the Hong Kong government’s scheme to attract talent to the city had drawn 93,000 applications, of which more than 73,000 were approved, according to official data. Of those, 60,300 had already arrived in the city.
A potential interest-rate cut in Hong Kong later this month is unlikely to dampen demand in the leasing market, analysts said. With the US Federal Reserve widely anticipated to start easing its policy stance, Hong Kong monetary authorities are expected to follow suit.
“The impact of a rate cut on the leasing market is likely to be positive in the short term, primarily due to the potential influx of talent attracted by a more accommodative business and economic environment,” JLL’s Chung said.
With the interest-rate cut expected to be gradual, leasing demand is not likely to significantly shift to the sales market, she added.
Ricacorp’s Chan differed slightly with his fellow industry insider’s views. A rate cut is likely to boost the number of buyers entering the market, with more likely to transition from renting to buying, which could slightly dampen rental demand.
“However, with skilled professionals continuing to arrive in Hong Kong and renting apartments, rents will still have a certain level of support,” he added.
Meanwhile, with developers still holding a large inventory of unsold flats, the leasing market is becoming an increasingly viable option, according to Chan.
“Rental demand is currently very strong and rental income remains stable, while property prices have yet to stabilise,” Chan said, adding that developers could consider shifting their properties from sale to rentals.
For example, Henderson Land has put 34 units for lease at The Henley III in Kai Tak from HK$16,000 to HK$17,000 a month, while in Fanling, the developer has 23 units at the One Innovale for lease at a starting price of HK$9,500 a month.
As of July, Hong Kong developers had 22,300 unsold residential units, about 1.7 per cent higher than the 21,900 they had at the end of 2023, according to Midland Realty.
In the next three to four years, as many as 109,000 new flats are expected to flood the market, according to the housing bureau.
“Developers are exploring other options amid the market downturn,” said Norry Lee, senior director of projects strategy and consultancy department at JLL in Hong Kong.


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Hong Kong’s residential rental market is on a tear, with rents likely to go past a previous record set in 2019. Photo: Martin Chan

Residential properties for sale and rent are displayed at real estate agencies in Hong Kong. Photo: Jelly Tse

2,800 new flats are poised to launch in Hong Kong as developers await interest rate cuts

Part of the Yoho Hub complex in Yuen Long, pictured on December 17, 2021. Photo: Jonathan Wong

Prospective buyers stand in line for a sale of the Blue Coast housing project, developed by CK Asset Holdings, on April 6, 2024. Photo: Bloomberg

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A view of Novo Land, a residential project by Sun Hung Kai Properties in Tuen Mun, on June 7, 2024. Photo: Edmond So

People enjoy a park during hot weather in Kai Tak, with the Oasis Kai Tak residential development in the background on July 7, 2024. Photo: Yik Yeung-man

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The rental index is about 3 per cent away from the peak seen in August 2019, a jump that is not entirely implausible, JLL says


The rental index is about 3 per cent away from the peak seen in August 2019, a jump that is not entirely implausible, JLL says.
