This is the real reason behind Hong Kong luxury residential rents’ rally in Q2

Rents on Hong Kong Island and in Kowloon inched up 1% and 2.5%, respectively.

As the effects of the fifth wave of COVID subsided, rents of luxury residential units in Hong Kong registered modest growths in Q2 2022. 

According to Savills, luxury rents on Hong Kong Island recorded a marginal growth of 1.0%, while rents in Kowloon and the New Territories rose by 2.5% and 0.5% respectively. 

Here’s more from Savills:

The real reason behind the rally, however, is that the leasing market is increasingly being driven by Mainlanders and ‘New Hongkongers’, Mainlanders who have been living in Hong Kong for seven consecutive years and have recently become permanent residents. They could have come to Hong Kong seven years ago under the one-way permit scheme, with a daily quota of 150 (54,750 a year), or through the Admission Scheme for Mainland Talents and Professionals (ASMTP) with around 10,000 successful applications per year. 

In addition, Mainlanders who have obtained an undergraduate or higher qualification in a full-time, locally accredited programme in Hong Kong are eligible to apply to stay and work via the Immigration Arrangements for Non-local Graduates (IANG) with no quota or sector restrictions.

The lockdowns in Shanghai and across multiple cities in China have inevitably meant that many Mainlanders have been looking to move to Hong Kong or further overseas to avoid confinement. Plenty of ‘New Hongkongers’ who previously moved back to China when the pandemic was at its worst began to trickle back to Hong Kong over the second quarter. The two travel schemes launched by the Hong Kong Government last year, Come2hk and Return2hk, allow 

Mainlanders (from Guangdong Province or Macao) and ‘New Hongkongers’ (returning from the Mainland or Macao) to travel to Hong Kong without compulsory quarantine. The policy has driven professionals and wealthier families seeking to rent luxury apartments in Hong Kong prior to their arrival in the city as a permanent address is required. 

On the ‘expat exodus’ we must remember that the outflow from Hong Kong is not all going to Singapore with Australia, India and Dubai all proving to be alternative destinations. Regarding Singapore, although there are pull factors for Hong Kong-based professionals, there are also push factors emerging. The lack of availability of suitable accommodation (rather than higher rents alone), the limited availability of openings for certain grades in the better-known international schools and the inconvenience of having to open the same job position to locals for at least a month before foreigners can apply, are creating barriers to movement from Hong Kong to the Lion City. This does not mean that we are seeing returning expats however, as Hong Kong’s many onerous restrictions still set it apart from most other global first tier cities.

Luxury rents presented a mixed picture in Q2/2022, with The Peak (+2.5%), Mid-Levels (+2.4%) and Southside (+1.2%) recording increments, while Happy Valley/ Jardine’s Lookout (-2.1%) and Pokfulam (-1.6%) recorded declines over the quarter. The rises in rents have been stimulated by returning Mainlanders and ‘New Hongkongers’ who prefer the harbour and city views of Mid-Levels, The Peak and Southside. They are looking for high quality, prestigious new developments or properties renovated to the highest standards and owned by the larger ‘corporate’ landlords. The buildings should preferably come with spectacular harbour views such as 21 Borrett Road, Branksome Grande and Queen’s Garden.

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