According to the "Hong Kong Residential Sales Market Overview" released by Jones Lang LaSalle today (5th), the residential rent has continued to rise, and the private residential rent index is only 3% below the historical high of 2019. The average rental yield of Class A residences (units with an area of ​​431 square feet or less) has reached a new high since 2012 in June.

According to the private residential property rent index of the Rating and Valuation Department, the A, B, and C type units rose by 6.9% year-on-year in July 2024, reaching the highest level since 2019. The current private residential rent index is only 3.0% below the historical high of 2019. The rental increase of A and B type units (with an area of ​​431 to 752 square feet) recorded the most significant increase, with rental indices increasing by 6.9% and 7.3% year-on-year respectively.

Jones Lang LaSalle Senior Director of Research Department, Trinette Chen, stated that the rental increase for smaller units is more significant, mainly driven by non-local students and professionals choosing to live near commercial areas. At the same time, the C type units (with an area ranging from 753 to 1,075 square feet) recorded a 6.3% year-on-year increase. The increase in demand for these properties mainly comes from the trend of switching from buying to renting. The expectation of further decline in house prices and the financial burden caused by high mortgage payments make renting more attractive, especially for local families who want to improve their living environment.

In the situation of rising rents and falling house prices, the average rental yield of Class A units climbed to 3.4% in June, 70 basis points higher than the average level of the past ten years, and reached a new high since 2012.

From the data, it appears that the main factors driving the growth of the leasing market in the near future are the increasing number of new households and the rising proportion of tenants compared to owner-occupiers. From June 2023 to June 2024, the average number of people per household decreased from 2.7 to 2.6, and the number of household increased by 1.5% year-on-year, an increase of 39,800 households, reaching 2.76 million households. At the same time, a recent survey on the specific situation of the "talent plan for bringing children to live in Hong Kong" showed that 86% of non-local talents surveyed are renting units, a significantly higher proportion than the overall population.

Li Yuen Fung, Senior Director of Projects Strategy and Advisory Department at Jones Lang LaSalle, stated that this trend indicates that the continued demand for residential rental properties will continue to drive rental growth. In addition, the further promotion of policies to attract talents by the government, such as expanding the scope of the "Quality Migrant Admission Scheme", is expected to further support this trend. Therefore, the rental and yields of small and medium-sized residential units are expected to continue to rise in the short term.

However, statistics show that there are some macro-level factors that may slow down the growth of rents.

He pointed out that the factors affecting residential rents in the future include a slight decrease in the population, stagnant income growth, and a weakening job market. From mid-2023 to mid-2024, the total population of Hong Kong decreased slightly by 4,300 people, this decrease was due to a negative natural population growth of 0.0181 million and a net outflow of 0.0302 million in other populations. On the other hand, there was an inflow of 0.044 million people holding one-way permits during the period. In addition, the median monthly household income growth rate decreased from 3.4% in January 2024 to 1% in June 2024. As income growth is unable to keep up with the speed of rent increases, households need to allocate a larger portion of their income to pay for rent. Moreover, there are signs of pressure in the job market, especially in the finance, insurance, real estate, and business services industry. The employment in these industries decreased by 0.015 million people year-on-year in the first quarter of 2024. This contraction may have a broader impact on the housing demand of foreign employees and high-income individuals.