Layoffs hit Hong Kong high-end rentals

The chill winds blasting through financial markets have hit rents for luxury properties in Hong Kong as banks lay off high earners and international companies cut back on expatriate packages, property brokerage Jones Lang LaSalle said on Monday.

With luxury homes costing HK$100 million (S$16.2 million) or more, rental yields for high-end homes already yield less than 2 per cent, a return set to dwindle further.

Hong Kong has the most expensive office and retail property in the world. According to Knight Frank, only London’s Knightsbridge neighborhood commands dearer rents than Hong Kong.

It costs US$25,000 (S$31,500) per month to house a CEO and his family in a 3,000-square-foot home in the city’s traditional luxury neighbourhoods, the Peak and the south side of Hong Kong island, the rival brokerage reported last week.

Housing the same family in a Knightsbridge costs US$30,000 a month.

Jones Lang Lasalle, issuing a mid-year report on the state of Hong Kong’s property market, saw rentals at the luxury end falling 4.2 per cent in the second half, after a 7.5 per cent fall in the first half.

Multinationals have been cutting back on expensive expatriate packages and increasingly prefer to hire employees on local terms. With the company no longer paying expensive rents directly to a landlord, employees often opt to keep some of their allowance and make do with a smaller home.

The hard times in the financial sector is also seen reining in a runaway market. Hong Kong property prices have risen 9 per cent in the first half, to stand around 50 per cent higher than they were at the start of 2009, with luxury homes showing the fastest gains.

Economic uncertainty has however hit demand, with transactions in the city down 25 per cent in the first half compared with the same period the year before.

“You will see a dramatic stop in growth in luxury capital values,” Mr Joseph Tsang, Hong Kong managing director for Jones Lang LaSalle, said, with at most a 2 per cent increase in values for the second half of the year. “People will wait and see.”

Source : Today – 23 Jul 2012

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