The rental markets of rival Asian financial hubs Hong Kong and Singapore have run into a pronounced reversal of fortunes.
Rents of prime accommodation in Singapore, typically favored by expatriates, have surged to the highest in over a decade, closing the gap with notoriously costly Hong Kong. The city-state is set for further gains as the country reopens and foreigners flood the market, including Hong Kong residents who have left due to the city’s crackdown on coronavirus disease 2019 (COVID-19) and civil liberties.
Hong Kong’s prime rents fell for the first time in two years as the mass exodus left landlords struggling to find tenants. Rentals dipped 2.1% in the second quarter compared with a year ago, underscoring the effect of prolonged border closures on expats, who have been the major source of rental demand in Hong Kong, according to a Knight Frank report.
Hong Kong’s rents are an outlier among global cities. From New York to London, rents have jumped on a tight supply, while higher mortgage rates have strained affordability, making it more difficult for renters to move into home ownership.
These factors, coupled with the influx of expats and wealthy immigrants, sent rents in Singapore soaring almost 31% in September compared to a year ago, according to data from real estate portals 99.co and SRX.
Still, while rents are falling in Hong Kong, it remains the world’s most expensive city for expats.
A fully furnished two-bedroom 1000-square-foot (93 square meters) apartment in Orchard, Singapore is leased at about $5,600 a month, PropertyGuru data show. In Mid Levels, Hong Kong, a similar property goes for $7,500 a month, according to real estate platform Spacious.
FLOCKING TO SINGAPORE
Singapore’s rising rents have not dampened demand. When tech consultant Mark Haynes moved his family from Hong Kong for a job opportunity, he did not hesitate to sign a S$7,000 ($4,900) a month, one-year lease for a two-bedroom privately owned apartment close to the central business district.
“We were outbid four times,” said the 56-year-old. “We didn’t negotiate anymore and took the next available one; couldn’t take the chance.”
Foreigners are not the only group exiting Hong Kong.
Hong Kong local Kelly Ho, 33, moved with her logistics worker husband and daughter in December last year into a one-bedroom privately owned suburban flat for S$2,300 a month.
Anecdotally, there has been an increase in demand for Singapore rental units from those born in Hong Kong and expats who used to live there, said Nicholas Mak, head of research and consultancy at APAC Realty Ltd. unit ERA.
Some relocated with their companies, while others chose Singapore for its reputable international schools and cultural similarities, he added.
Expats from Hong Kong are expected to be Singapore’s key source of rental demand, Knight Frank said in a separate report. They rent homes while they wait for permanent residency or citizenship, it added.
That includes Ms. Ho, who wants to stay in the country for good. There is “no more freedom,” she said, citing Beijing’s tightening political grip on Hong Kong.
Arrivals from other countries are just one side of the picture to Singapore’s surging rents. Property curbs introduced by authorities in September to cool the buoyant housing market may also cause more people to rent.
The rental market may remain strong for at least six to nine months, until an increase in home supply brings some relief next year, said Mr. Mak.
EMPTY HOMES
It’s a different story in Hong Kong, where the exodus of residents intensified this year.
The outlook is negative toward the yearend, said James Fisher, chief operating officer at Spacious. “We did see a bit of demand increase, but I think this is a seasonal or short term benefit from reduction in quarantine restrictions and not enough to cover all the inventory out there.”
In Hong Kong, areas popular with expats are among the locations with the biggest fall in rents since their peak in mid-2019, Spacious data show. The Poho area above Sheung Wan and south of Lantau Island saw rental values drop by more than 20% since then.
Hong Kong Chief Executive John Lee earlier this month announced plans to woo back foreign talent. This includes cutting property duties for non-permanent residents and relaxing visa rules to reverse a brain drain prompted by isolationist COVID-19 policies and a crackdown on political dissent. The city faces mounting competition from Singapore as a regional hub for global business and talent.
The new initiatives will help, but without a timeline to lift the remaining COVID-19 curbs and return to pre-pandemic norms, “regaining ground lost during the pandemic to Singapore and other rivals will take time,” said Bloomberg economist Eric Zhu in a note.
In the meantime, some expats, mainly finance executives, who have been in Hong Kong since before the pandemic are taking advantage of the current low rents in areas such as Mid Levels and the Peak, said Centaline Property Agency Ltd. broker Matthew Kwong.
For instance, an expat signed a lease for a four-bedroom penthouse in Mid Levels for HK$80,000 ($10,200) in September, he said. Before the pandemic, the lease would have been HK$100,000. — Bloomberg
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The article was originally published in ABS-CBN and written by Katrina Domingo.
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