Savills World Research

Briefi ng Residential leasing October 2015

Image: Monmouth Villa, Mid-Levels East SUMMARY Luxury apartment rents saw a small rise in Q3 while townhouse rents saw a slight correction.

The third quarter leasing market the British and Americans in terms of declines in and the New was reasonably active, especially for activity. Many are self employed with Territories. budgets of HK$50,000–HK$80,000 budgets of HK$30,000 to HK$50,000 per month. per month.

Individuals rather than corporates In Kowloon and the New "As we move into the last accounted for the majority of Territories, rents softened alongside quarter of the year, low levels movement, most of which were local demand and an increase in the moves rather than new arrivals. number of available units. More of activity and higher landlord activity was noted in areas such as A quiet sales market due to the incentives to agents suggest recent stock turbulence meant slightly Kowloon Station and Tai Po. improved availability, particularly of little room for further rental smaller units of 500 sq ft to 1,200 sq ft. Looking ahead, we are expecting a quiet end to the year with a relatively growth." Simon Smith, Savills Europeans, mostly French, Italians stable rental outlook. We may even Research and Spanish continue to out-number see some further selective rental savills.com.hk/research 01 Briefi ng | Hong Kong residential leasing October 2015

Market commentary GRAPH 1 The third quarter leasing market luxury rental indices by district, was reasonably active, especially for Q1/2003–Q3/2015 budgets of HK$50,000–HK$80,000 per month. Individuals rather than Mid-Levels Pokfulam The Peak Happy Valley/Jardine's Lookout Southside/Shouson Hill corporates accounted for the majority 300 of movement, most of which were local moves rather than new arrivals. 250 Our records suggest that no particular industry dominated activity either in 200 terms of arrivals or departures. 150

Our third quarter luxury apartment Q1/2003=100 residential indices show a mild 100 increase of 0.6%. Rental changes across districts were diverse and rents 50 in Happy Valley/Jardine’s Lookout grew the most at 2.2%. Completion of 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 renovation works in Victoria Gardens 03 04 05 06 07 08 09 10 11 12 13 14 15 and Vista Mount Davis drove Pokfulam rents to rise by 2.1%, followed by Source: Savills Research & Consultancy

TABLE 1 Mid-Levels, The Peak and Southside transactions, Q3/2015

Saleable area HK$ per month HK$ per sq ft District Unit Address (sq ft) (incl. mgnt. & rates) saleable The Peak House 8 Severn Road 2,378 158,000 66

The Peak House Strawberry Hill 2,930 190,000 65

Mid-Levels Apartment Arezzo 916 61,000 67

Mid-Levels Apartment Aigburth 2,119 146,392 69

Southside Apartment Hong Kong Parkview 2,067 105,000 51

Southside House Horizon Crest 2,244 142,000 63

Source: Savills Residential Leasing, Savills Research & Consultancy

TABLE 2 Luxury apartment rental movement by district, Q2/2015, Q3/2015 and 2014

Q3/2015 (QoQ, %) Q2/2015 (QoQ, %) 2014 (%)

Mid-Levels -0.3 +6.6 -8.5

Pokfulam +2.1 +1.1 -1.7

The Peak -1.3 +1.1 -8.4

Happy Valley/Jardine's Lookout +2.2 +2.2 -3.4

Southside/Shouson Hill +1.2 +3.7 -6.9

Hong Kong Island +0.6 +3.6 -6.3

Tsim Sha Tsui/Hung Hom -1.2 +4.1 +6.1

Ho Man Tin/Kowloon Tong -3.1 +8.6 +8.5

Kowloon -1.7 +5.1 +6.6

Discovery Bay -3.0 +2.1 -2.4

Sai Kung -1.5 +0.6 +8.8

Shatin/Tai Po 0.0 +0.7 -3.0

New Territories -1.9 +1.2 +2.3

Source: Savills Research & Consultancy

savills.com.hk/research 02 Briefi ng | Hong Kong residential leasing October 2015

Southside (1.2%). Meanwhile rents in GRAPH 2 Mid-Levels and Peak fell by 0.3% and Townhouse rental indices by district, Q1/2003–Q3/2015 1.3% respectively.

Peak Southside A quiet sales market due to the recent 200 stock turbulence meant slightly 180 improved availability, particularly of 160 smaller units of 500 sq ft to 1,200 sq 140 ft. Budgets of more than HK$150,000 120 100 per month are still rare and in what 80 Q1/2003=100 could be a sign of underlying market 60 weakness, some major landlords are 40 now offering two months commission 20 to lettings agents. 0 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 03 04 05 06 07 08 09 10 11 12 13 14 15 In terms of nationalities, Europeans, mostly French, Italians and Spanish Source: Savills Research & Consultancy continue to out-number the British and GRAPH 3 Americans in terms of activity. Many Kowloon and New Territories luxury apartment rental indices by are self employed with budgets of HK$30,000 to HK$50,000 per month. district, Q1/2003–Q3/2015 Areas to the west are popular among Tsimshatsui / Hung Hom Ho Man Tin / Kowloon Tong Discovery Bay Sai Kung Shatin / Tai Po this demographic – Soho, Sheung 200 Wan, Sai Ying Pun and Kennedy Town 180 in particular. 160

In Kowloon and the New Territories, 140 rents softened alongside demand and 120 an increase in the number of available Q1/2003 = 100 100 units. More activity was noted in areas 80 such as Kowloon Station and Tai Po 60 where large scale developments came Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 to market, including The Austin and 03 04 05 06 07 08 09 10 11 12 13 14 15 Grand Austin in Kowloon Station and Source: Savills Research & Consultancy TABLE 3 Kowloon transactions, Q3/2015

Saleable area HK$ per month HK$ per sq ft District Unit Address (sq ft) (incl. mgnt. & rates) saleable

Kowloon Station Apartment The Waterfront 1,978 87,800 44

Kowloon Station Apartment The Coronation 1,622 70,000 43

Ho Man Tin House Kadoorie Avenue 2,978 250,000 84

Tsim Sha Tsui Apartment The Masterpiece 1,977 128,000 65

Kowloon Tong Apartment 1 & 3 Ede Road 1,753 120,000 68

Source: Savills Residential Leasing, Savills Research & Consultancy

TABLE 4 Discovery Bay & Sai Kung transactions, Q3/2015

Saleable area HK$ per month HK$ per sq ft District Unit Address (sq ft) (incl. mgnt. & rates) saleable

Discovery Bay House La Costa 1,189 63,000 53

Discovery Bay Apartrment Coastline Villa 1,903 68,300 36

Discovery Bay Apartment Crestmont Villa 1,108 26,000 23

Discovery Bay Apartment La Serene 1,405 42,000 30

Sai Kung House Tan Cheung 2,100 52,000 24

Source: Savills Residential Leasing, Savills Research & Consultancy

savills.com.hk/research 03 Briefi ng | Hong Kong residential leasing October 2015

TABLE 5 Two-year rental movements of luxury apartments, Q3/2013–Q3/2015 From a global From Q3/2013 to Q3/2015 (%) perspective Mid-Levels +1 Pokfulam +2 The Peak -7 London, Hong Kong and New York are the Happy Valley/Jardine's Lookout +3 world’s most expensive cities for companies to Southside -3 accommodate employees, with London just ahead, according to the latest Savills Live/Work Index which Tsim Sha Tsui +11 measures the combined cost of residential and Ho Man Tin/Kowloon Tong +22 offi ce rental per person per year. Both London and Discovery Bay -2 New York real estate costs remain less expensive Sai Kung +5 relative to economic productivity than Hong Kong, Shatin/Tai Po -4 Shanghai and Mumbai, according to the 12 Cities Kowloon +14 Report. Sydney, Los Angeles and San Francisco New Territories +1 offer best value by this measure.

Source: Savills Research & Consultancy The average cost per head across the 12 leading GRAPH 4 world cities in the Savills study is US$74,945 per year, which is 1.4 times the average city GDP per Serviced apartment rental indices, Q1/2003–Q3/2015 head of population. Hong Kong’s ratio is 3 times

Hotel-like Apartment-like and falling, London 2 times and stabilising and New 190 York 1.5 times and rising.

170

150 Mont Vert in Tai Po. Rents in Kowloon and the New Territories fell by 1.7% 130 and 1.9% respectively.

110 Outlook Q1/2003 = 100 = Q1/2003 90 Looking ahead, we are expecting a quiet end to the year with a relatively 70 stable rental outlook. We may even see some further selective rental 50 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 declines in Kowloon and the New 03 04 05 06 07 08 09 10 11 12 13 14 15 Territories.  Source: Savills Research & Consultancy

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Edina Wong Simon Smith Ron Mak Senior Director Senior Director, Asia Pacifi c Assistant Manager +852 2842 4283 +852 2842 4573 +852 2842 4287 [email protected] [email protected] [email protected]

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