Hong Kong Counts Toll On Rents, Prices

Source : The Business Times, February 3, 2009

(HONG KONG) Home prices and rents in Hong Kong fell in 2008 as the city's economy and equity markets suffered from the global financial crisis, Centaline Property Agency Ltd said.

Advertising to attract: Rents fell by a smaller degree than prices because of a lack of new housing units, helping rental yields rise 27 basis points to 4.63%

Prices for non-government-built residential units fell 16.3 per cent last year, according to an index of 73 apartment buildings that was developed by Centaline, one of Hong Kong's biggest real estate agencies. Rents dropped 9.7 per cent to HK$13.90 (S$2.71) a square foot in 2008 from the previous year, Centaline said in a report on its website.

Rents fell by a smaller degree than prices because of a lack of new housing units, helping rental yields rise 27 basis points to 4.63 per cent, Wong Leung-sing, an associate director at Centaline, said in the report that was dated Sunday. One basis point is 0.01 percentage point.

'This is the highest since the 5.46 per cent posted in 2003, when the city was hit by the Sars epidemic,' Mr Wong said.

'Given the sizeable yield, there is likely to be more buying from long- term investors.'

Hong Kong's economy slid into a recession last year for the first time since the severe acute respiratory syndrome stalled growth.

Hong Kong developers likely finished building 8,776 units in 2008, the lowest since 1972, Centaline said in a report in January. Share prices of Hong Kong property developers dropped yesterday, with the Hang Seng Property Index that tracks six such companies losing 3.7 per cent as of 11.44 am local time, making it the biggest decliner on the local benchmark.

Cheung Kong (Holdings) Ltd, Hong Kong's second-biggest property developer by value, traded 3.8 per cent lower at HK$68.90. Sino Land Co, the second-biggest seller of new private homes last year, dropped 4 per cent to HK$7.30, the lowest in a week.

Following the launch of new properties this year, coinciding with the traditionally more robust season in the post Lunar New Year holiday, the decline in rents may gradually slow and stabilise with housing prices, Mr Wong said.

The Hong Kong stock market was closed from Jan 26 to Jan 28 for the holiday. -- Bloomberg