Company Senior Managers' Salary Cut Cause An Increase in Surrender of Tenancy for Luxury Apartment.

28Hse Editor  2020-04-14  #Transaction
"A junior suite in The Arch used to be rent for HKD30,000 monthly rent, but now is less than HKD20,000. There may not have people to rent. It needs to wait two or three months before it is rented out." Shanghai-born owner Mrs. Chen came to the real estate agent to put on lease this day. Her tenant was laid off and terminated the contract early. Not far from The Arch, the square of a high-speed rail station which had stopped for one and a half months is deserted. In the past, the luxury apartments near Kowloon Station were popular with both mainland customers and merchants who were traveling between the mainland and Hong Kong since they are close to the high-speed rail station. But the leasing business has shrunk, and the surrender of tenancy increases with the economic downturn this year. The houses available for rent rise every month, with about 460 units currently, an increase of 60 units in three months. The lease has dropped by 20 to 30%, and some units have been vacant for half a year. Journalist(Leong Yuet Kam) The real estate agent reminded Mrs. Chen that she could recover the rent when the tenant terminated the contract early, but she was considerate of the tenant's plight and did not want to hit someone when he is down. According to the estate agent, many owners in West Kowloon have recently encountered the same situation as Mrs. Chen. "They are worry to see the tenants call. Many tenants demand a rent reduction and even want to cancel the contract early affected by the company's business deterioration, salary reduction, or housing allowance cuts. In fact, after the beginning of this year, some tenants sublet apartments in other estates after the previous lease expired. The rent for the flats newly occupied are cheaper. Or they may rent a smaller one. " There has been no tenant after putting on lease for half a year. The black storm and the COVID-19 epidemic have further deteriorated the economy that had fallen into recession. Many industries appear cases of loss, suspension of business, or even close down. The first to be affected are a group of low-income employees who engage in retail catering and face layoffs, salary reductions or unpaid leave, and a group of senior executives who generally have salary reductions by 30-40% or even up to 75%, or were laid off. These high-income people used to be stable tenants of luxury apartments because there were sufficient housing allowances provided by the company, but now they are a high-risk group. The number of available residential properties for rent on top of Kowloon Station has increased by 3% to 5% in recent months. There are about 460 units currently, and the number has increased by about 60 in the past three months. Some have not been rented out after being put on lease for half a year. The rents for the apartments that can be rented out are 20% lower than the market price. The weak economy suppresses the lease demand. The situation in Kowloon Station is just the tip of the iceberg. All districts and even the Peak have seen rent reduction since the end of last year. The Chief Executive of the Midland Real Estate Residential Department, Po Siuming, expresses that the COVID-19 epidemic did intensify the decline in residential rents. He believes the main reasons are the recession of the local economy and the continuous increase in the unemployment rate. The rental budget for ordinary people will be less than it was in the good times, and landlords generally will not increase the rent as long as tenants are willing to renew during the economic downturn. They even reduce more rent to help to overcome the difficulties if they know that the tenant may suffer from income reduction and other problems. "Demand from mainland students and overseas corporate executives for renting in Hong Kong has also significantly reduced. Besides, cases of selling turn to renting increase because many owners who purchased the houses only two or three years ago are not willing to sell at low prices. There are nearly 19,000 units of the first-hand property being occupied this year. So, there would be over 5,700 units for lease if about 30% of them would be put on rent. Pak Shek Kok of Tai Po, LOHAS Park in Tseung Kwan O, Yuen Long, and Tuen Mun have the most first-hand property units that are newly occupied. These places would be the hardest-hit areas, and rents there will undoubtedly be under pressure. " Po Siuming expects that the residential rent will reduce by another 3% if the epidemic continues unabated in the second quarter. Data from the RVD shows that private housing rents in Hong Kong have risen for ten years in a row since 2008. However, a violent conflict triggered by the amendment crisis in the second half of last year drove the Hong Kong economy into a technical recession since the third quarter of last year. The housing rents started to adjust at the end of the third quarter last year. In December last year, the rent index had fallen for four consecutive months, and it had dropped by nearly 1.8% throughout the year, breaking the ten-year rental increase. Monthly rent in Kowloon Bay is HKD9,000. A residential lease report from Savills indicates that luxury apartment rents on Hong Kong Island, Kowloon, and the New Territories fell 6.1%, 7.4%, and 4.5% respectively in the first quarter of this year, all recording the worst quarterly performance since 2010. The luxury apartment rents even have dropped by about 10% or more in the first quarter. The budget and demand for renting flats by the public are also declining as the continuous rising of unemployment rate. In recent months, apartments being put on lease for monthly HKD10,000 or less in the New Territories West and urban areas have increased significantly. According to the data provided by Many Wells, there are currently about 149 units available for rent at a monthly rent of HKD10,000 or less in Tuen Mun District, and about 108 units are private housing. For example, low-rise room 4 in block 4 of Goodview Garden in Tuen Mun, with the usable area of 341 sq ft, is only at HKD8,900 monthly, and the monthly sq ft rent is about HKD26. A low-rise apartment in block 10 of the Reach in Yuen Long, with the usable area of 356 sq ft, is at a monthly rent of HKD9,500, and the sq ft rent is HKD26.7. There are also units in urban areas at a monthly rent of less than HKD10,000. At the beginning of last month, middle-rise room 6 in block H of TAK BO GARDEN in Kowloon Bay with the usable area of 282 sq ft was rent out at monthly HKD9,000.
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