Hong Kong, once known as a city only affordable to those with plenty of cash flow is now fast becoming a paradise for rental bargains. The first signs of falling rents were seen back in August last year just before the collapse of Lehman Brothers Holdings Inc which sparked a global banking crisis.
Since then tenants have used the current global crisis as a bargaining tool to de-crease their previously high rents and the strategy seems to work well. As more and more landlords struggle to rent their properties to willing buyers, they are being forced by the economy to reduce rent.
Hong Kong tenants are laughing because it gives them power to negotiate on their terms for a change. Like Raif Cabbabe, an expat from Australia who moved to the city to work as a steel trader. When he offered $2,600 for his 84-square meter Soho flat his property agent thought he was mad. The flat was previously on the market for more than double the offered money, but the landlord was basically forced to say yes if he wanted the flat occupied at all.
According to data from real estate agency Centaline Property Agency Ltd. prices have steadily been falling in Hong Kong for some time. And analysts predict that home leases will fall up to 20 percent this year placing Hong Kong in the first recession since 2003.
While rentals are becoming cheaper, job availability is getting sparse. Unemployment levels have actually risen by 0.5 percentage points in the last three month which results in the biggest increase in a decade.
Meanwhile the government is doing their bit to help boost the slumping market by spending more on updating infrastructure, suspending property taxes and refunding taxes.
This turn of events certainly provides Hong Kong residents with more choice; they can afford bigger apartments for less money provided they still operate with the same budgets last year. However, many job cuts in the financial sector of Hong Kong Islands have hit workers very hard, especially expat employees who went to Hong Kong many years ago and setup new lives.
On the property sales front things are moving very slow. January sales fell by 67 percent from the year before. Come April the 1st, property rates will be waived by the government with a household cap of HK$3,000 to help alleviate financial pressures in the community.
Photo credits: wenzday via Flickr