Hong Kong is the Most Expensive City in the World for Luxury Rentals

Despite the pandemic and political challenges, Hong Kong remains the most expensive city in the world to rent a luxury apartment, according to a recent report from Knight Frank.

A good example of this is a house in Hong Kong’s sought-after Peak district that rented for HKD$1.35 million (A$223,709) per month earlier this year, equating to more than US$2 million (A$2.5 million) a year.

Prime rents in Hong Kong averaged US$6.7 (A$8.6) per sq ft at the end of 2020, meaning a tenant with a budget of US$10,000 (A$12,858) per month would be able to rent less than 1,500 square feet.

Knight Frank bases their global comparisons on a three-bedroom apartment in a central location but noted that detached homes in some cities can achieve even higher premiums.

New York remains the second most lucrative market, with US$10,000 (A$12,858) a month offering US$2250 (A$2893) square feet on average, despite prime rentals having softened since the start of the pandemic.

The next three cities, Singapore, London, and Sydney, are in the middle of the pack, renting between 2,500 and 3,000 square feet for US$10,000 (A$12,858).

Dubai and Madrid, out of the eight cities Knight Frank tracks, provide the most space for a monthly rent of US$10,000 (A$12,858) – 4,800 and 5,000 square feet, respectively.

11 Plantation Road. rented for HKD$1.35 million (A$223,709) per month earlier this year. Image: 11 Plantation Road.

The ongoing pandemic has affected the luxury rental market in a few different ways around the globe, according to Knight Frank’s head of international residential research Kate Everett-Allen.

“When the pandemic hit corporate tenants and international students – two key sources of demand for prime rental properties in first tier cities – were amongst the first to head home or relocate temporarily,” she said.

“The resulting uptick in supply put pressure on rents and saw landlords forced to change their strategy to avoid lengthy void periods.”

Everett-Allen said rents in prime central London and Manhattan both fell 14 per cent in the year to February 2021.

“However, as we highlighted earlier this year the tide is turning; the rate of rental declines is slowing and new lease signings are recovering in both markets,” she said.

“Motivated by large discounts, prime tenants are making their move back into some city centres hopeful of shorter commutes post the pandemic,” she added.

A key part of the prime rental markets recovery globally is the easing of travel restrictions.

“As soon as the passenger numbers return via the main transport hubs, we will see fairly a rapid correction of the recent rent reductions,” Knight Frank head of prime central London lettings David Mumby said.

“Stock will return to the short-term Airbnb rental market and with a normalisation of office occupancy, the undersupply of prime property will drive rents upwards.

“We are already seeing this starting to materialise in certain areas for the very best properties and it’s only a matter of time before this feeds through to the wider market,” he concluded.

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