By Clare Jim

HONG KONG (Reuters)

Some Hong Kong developers are shifting focus to the housing rental and leasing market to navigate a prolonged downturn in the property sector and meet rising rental demand from mainland Chinese professionals and students.

This strategic pivot is notable in a city known for some of the world’s most expensive real estate, reflecting changing demographics. Following the anti-government protests in 2019 and the pandemic, Hong Kong experienced an exodus of residents, including expatriates, leading to a significant population shift filled by mainland Chinese arrivals due to various talent admission schemes launched in 2022.

As of July, private home rents in Hong Kong reached their highest in nearly five years, while home prices plummeted by 22% during the same period.

With locals increasingly preferring to rent amid an uncertain economic landscape, realtors predict the trend of diverging home prices and rents will persist in the foreseeable future.

Earlier this month, Henderson Land, a prominent Hong Kong developer, announced that part of its Baker Circle Dover project on the Kowloon peninsula would be available for rent instead of sale. Though the exact number of available rental units was not disclosed, 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 apartment.

Traditionally, developers have typically sold all flats in residential developments. In a statement, Henderson noted, “Prompted by the government’s various measures on talent attraction, demand in the residential leasing market has surged. (Hence we are using) part of the previous launches to respond to the market.”

Smaller developer Chevalier International also announced that it would reserve all 58 flats in a new building for rental to meet increasing demand.

These initiatives come as the city approved 210,000 applications under its talent schemes launched two years ago. One scheme allows graduates from the world’s top 100 universities or those earning at least HK$2.5 million annually a 24-month visa to stay in Hong Kong. According to Chief Executive John Lee, 140,000 of those approved have already arrived, with many likely from mainland China.

STUDENT HOUSING

Property investors are increasingly focusing on the rental market, refurbishing various properties, such as hotels and commercial buildings, for student accommodation, as demand ramps up.

Raymond Lee, CEO of Savills’ Greater China division, stated, “There is more demand for student housing due to an increased (foreign student) quota, and many mainland Chinese cannot secure mortgage loans for apartments.”

Last year, the Hong Kong government announced a plan to double the quota for non-local students in eight universities to 40% starting in the 2024 academic year.

In the past two months, at least three property deals have emerged to cater to growing demand from students. In June, the Hong Kong Metropolitan University purchased a newly completed hotel in Hung Hom for HK$1 billion, converting it to student housing—the largest deal for student accommodation thus far.

Lee cautioned that rents for student housing could decrease in the longer term if supply rises too quickly. However, students are willing to pay more now to avoid being priced out. Julia Zhong, a student from northeastern China, shared, “I’m glad I got the new lease in June, which is HK$500 more per head than my previous flat. I’ve heard rents increased significantly in July and August.”

($ = 7.7985 Hong Kong dollars)