Landlords in the New Territories are the big winners of Hong Kong’s gloomy real estate market

A 235 square foot studio apartment at Novo Land in Tuen Mun was rented for HK$12,200 (US$1,565), equivalent to HK$51.9 per square foot and a new high for rent in the development.

Rent is comparable to some projects on Hong Kong Island. For example, a 236-square-metre studio apartment at Holborn in Sai Wan Ho is currently rented for HK$14,000 per month, or HK$59 per square metre, according to data available on Midland Realty’s website.

Per square metre, the rental yield is higher than units in Residence Bel-Air, a luxury residential development in the southern district of Hong Kong Island. A 123 sq m sea-view unit in phase six of Bel-Air was rented for HK$65,000 per month, or HK$48.5 per square metre, according to a Midland broker.

“The rental market in this area (New Territories) is relatively more active,” said Buggle Lau Ka-fai, chief analyst at Midland Realty. Small to medium-sized apartments priced at around HK$20,000 per month are very popular and New Territories tends to offer more choice than Hong Kong Island, he added.

The Hong Kong monetary authority left its benchmark interest rate unchanged for the seventh time earlier this month, a move in line with the US Federal Reserve’s decision. The Fed hinted at a possible rate cut this year as early as September, while investors have priced in three cuts for the rest of the year, according to CME Group.

According to government figures, prices for second-hand properties fell by 1.2 percent in June to their lowest level since October 2016. This brings the total decline this year to 3.1 percent.

With more universities in Kowloon and the New Territories, rising student demand for rental housing has become a major support for prices in those areas, Lau said, according to the latest data for July. Aside from foreign students, around 140,000 people have come to the city since the government launched the Top Talent Pass Scheme in late 2022, sources said.

Rents in New Territories West have performed best in Hong Kong this year, recording a cumulative increase of 6.7 percent in the first seven months, according to Centaline’s Centa-City Rental Index, while New Territories East has seen a 5.1 percent increase. Both are within 3 percent of their record highs set in 2018 and 2019 respectively.

The gains outpaced the average increase in Hong Kong, according to the Centaline index, which tracks rents in 138 residential estates. The broader market rose 4.8 percent this year through July. Rents in Kowloon rose 4.8 percent, while Hong Kong Island saw a 4.3 percent increase, it said.

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How Hong Kong’s real estate market became one of the most expensive in the world

How Hong Kong’s real estate market became one of the most expensive in the world

“The rental market is thriving overall,” says Lucia Leung, head of research and advisory for Greater China at Knight Frank in Hong Kong. “When high-quality offers emerge in areas where supply is tight, rents can be higher.”

Given the tight supply of rental properties during the summer holidays, new listings are usually snapped up quickly, she said. Locations along the East Railway MTR line in New Territories are particularly popular, she added.

Demand from newcomers to the city is driving up rents as they weigh the cost of buying their own home, says Norry Lee, senior director of project strategy and advisory at JLL in Hong Kong, especially amid growing expectations that interest rates will fall later in the year.

“There is a wait-and-see mood in the market, with some potential buyers switching to renting,” said Knight Frank’s Leung. “Due to the shortage of rental properties, rents in some hotspots have reached multi-year highs,” she added.