Betting on Chinese demand, Hong Kong developers tap rental market By Reuters

By Clare Jim

HONG KONG (Reuters) – Some Hong Kong developers are now turning to the home rental and leasing market to deal with a prolonged housing market slump and meet growing rental demand from mainland Chinese professionals and students.

The change in developers’ strategy is a rare move in a city that boasts some of the highest property prices in the world and underscores Hong Kong’s changing demographics.

The former British colony saw an exodus of residents, including expats, 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 series of talent admissions schemes launched in 2022 .

Private home rents in Hong Kong rose in July to the highest level in nearly five years, while home prices fell 22 percent over the same period, the latest data showed on Wednesday.

With locals choosing to rent rather than buy due to an uncertain economic outlook, many realtors expect the diverging trend in home prices and rents to continue in the near term.

Earlier this month, Henderson Land (OTC:), a major Hong Kong developer, said it would lease part of its Baker Circle Dover (NYSE:) project on the Kowloon peninsula instead of selling it.

It did not disclose how many units were available for rent, but said more than 20 units had been leased within a week, with monthly rents ranging from about $US14,000 ($1,795) for a studio to $US19,000 for a one bedroom apartment.

Traditionally, developers usually list all their apartments for sale in a residential development.

“Encouraged by various government measures to attract talent, demand in the residential leasing market has increased,” Henderson said in a statement. “(So we use) some of the previous releases to respond to the market.”

Its smaller company, Chevalier International, also announced earlier this month that it would save all 58 apartments in a new building in a neighboring neighborhood for rental to meet demand.

Such projects come as the city approved 210,000 applications under its talent schemes launched two years ago. One of its schemes offers graduates from the world’s top 100 universities or those who earn an annual income of at least US$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 chief executive John Lee this week, and property market experts estimate that most come from mainland China.

STUDENT HOUSING

Property investors are also increasingly moving into the rental market, renovating various properties, including hotels, commercial and residential buildings for student housing, real estate agents said.

“There is more demand for student housing now because the (foreign student) share has increased and also many mainland Chinese cannot get a mortgage for an apartment,” said Raymond Lee, CEO of real estate consultancy Savills Greater China.

The Hong Kong government announced last year that starting in the 2024 academic year, the quota for non-local students at the eight universities would be doubled to 40% of admissions.

Hong Kong has seen at least three property deals in the past two months aimed at meeting growing demand from students.

The Metropolitan University of Hong Kong bought a newly completed 255-room hotel in Hung Hom for HK$1 billion in June for use as a student dormitory, its biggest student housing deal to date.

While Lee warned that rents for the student housing market could fall in the longer term if supply increases rapidly, students are willing to pay a rise for fear of being priced out.

“I’m glad I got the new lease in June, which is $500 more expensive per person than my previous apartment,” said Julia Zhong, a student from Shenyang city in northeast China who moved recently in a two bedroom apartment close by. at the University of Hong Kong and shares it with her flatmate.

“I heard the rents went up a lot in July and August.”

($ = 7.7985 Hong Kong dollars)