Luxury-home rents in Hong Kong and Singapore, two of Asia’s most expensive cities for apartment leases, are declining for a third year as banks squeezed by slowing growth cut budgets for expatriate workers.
Rents for Hong Kong homes that broker Jones Lang LaSalle Inc. categorizes as luxury fell about 1.1 percent in the first half of 2013, bringing their losses to about 13 percent since peaking in October 2011. The average monthly rent of Singapore condominiums that charge at least S$12,000 ($9,670) a month slid 0.2 percent to S$4.86 per square foot in the three months ended June, the lowest since the December 2009 quarter, London-based broker Savills Plc said.
Banks, including Morgan Stanley and Barclays Plc, are cutting investment-banking positions in Asia and scaling back expenses for many employees as corporate-finance activities in the region decline amid China’s slowing economy. Rents for luxury homes in Hong Kong, or those commanding more than HK$50,000 ($6,449) a month, could fall 10 percent this year, according to Crown Relocations.
“We’re not out of the woods yet in terms of the softening rental demand,” said Simon Smith, Hong Kong-based senior director of research and consultancy at Savills. “We’re still seeing a lot of turmoil in the financial services sector.”
Hong Kong was the most-expensive place in Asia and the world for expatriate accommodation, a survey in January by London-based consulting firm Employment Conditions Abroad Ltd. showed. Tokyo and Singapore were ranked second- and third-most costly in the region, according to the survey, which compared rents for “high-end, three-bedroom apartments.” Globally, Caracas and New York ranked second and third after Hong Kong last year, with Singapore coming in eighth.
In Hong Kong, the majority of investment bankers on expatriate contracts are now getting about HK$50,000 to HK$80,000 a month in housing allowance, compared with HK$60,000 to HK$100,000 before the collapse of Lehman Brothers Holdings Inc. in 2008, said Steven Hui, Hong Kong-based real estate and tenancy management manager at Crown Relocations.
Housing budgets for foreigners in Singapore have come down to about S$2,500 to S$3,500 a month, compared with about S$4,000 to S$5,000 a year ago, said Alan Cheong, senior director of research and consultancy at Savills in the island-state.
“A lot of the demand has been driven by banking and finance and that’s still relatively weak,” Denis Ma, Hong Kong-based director of Pearl River Delta research at Jones Lang LaSalle, said.
Share sales in Asia fell to a four-year low of $128.5 billion in 2012, according to data compiled by Bloomberg. Companies have raised $92.7 billion since the beginning of the year, the data showed.
Merger and acquisition activities in the Asia Pacific region totaled $1.1 trillion since the beginning of 2012, compared with $1.6 trillion in the two years through the end of 2011, according to data compiled by Bloomberg.
Morgan Stanley trimmed about 55 to 60 jobs in their investment-banking division for the Asia-Pacific region excluding Japan, while Barclays planned to cut at least 15 percent of its investment-banking position in Asia, people with knowledge of the matter said in January.
Nick Footitt, a Hong Kong-based spokesman for Morgan Stanley, and Allister Fowler, a spokesman for Barclays in Hong Kong, both declined to comment on the January reports.
Three employees of banks and brokerages, who asked not to be identified because they weren’t authorized to talk publicly about their packages, said that expat cutbacks had forced them to find less expensive housing in Hong Kong and Singapore. They said they knew of others who had to do the same.
“There has been a substantial reduction in expat packages over the last three years with many banks removing housing allowances,” said Mark Enticott, Hong Kong-based managing director at Ambition Group Ltd., an Australian recruiting firm. “When an expat’s package is localized or the company has reduced the housing allowance, we have seen people move to cheaper housing arrangements.”
Rents at The Peak, one of Hong Kong’s most exclusive residential districts, where companies such as HSBC Holdings Plc and Swire Pacific Ltd. provide housing for their top executives, will fall about 7 percent in the year through May 2014, a report by broker Colliers International showed.
“What we’re seeing is some people having to move off the Hong Kong Island” because of the cut in allowances, said Savills’s Smith, referring to one of Hong Kong’s three main regions. More expatriates are now moving to areas further away from the city’s commercial district, including Sai Kung and Discovery Bay on Lantau Island, he said.
The number of vacant units available for leasing normally peaks in the fourth quarter in Hong Kong after tenants take up new places before the school year starts in September, said Crown Relocations’ Hui.
Hong Kong’s luxury districts are concentrated on Hong Kong Island and include Mid-levels, an area that is connected to the Central business district by an escalator, and the Island South, home to tycoons including Li Ka-shing, Asia’s richest man.
In Singapore, expats typically live in upscale areas such as Orchard Road, near the island-state’s prime shopping belt, and Holland Village, which is dotted with restaurants and bars. Younger expats prefer to live closer to the central business district at Raffles Place, home to banks including HSBC and Morgan Stanley, and Tanjong Pagar, an area on the fringe of the prime office area, according to Alice Tan, head of consultancy and research at Knight Frank LLP.
A 11,012-square-foot apartment at the Marina Bay Residences in the new office area, where UBS AG and Citigroup Inc. are based, is being offered for S$80,000 a month, according to propertyguru.com, a search portal for home buying and rentals. Luxury apartments along Orchard Road are renting for as much as S$20,000 a month.
“At the very senior level and strategic roles, full housing and children education still exist, but across the board, full-housing allowance or separate housing allowance is fast becoming a thing of the past,” said Will Tan, a managing director at Singapore-based recruiting firm Principle Partners Pte, which focuses on the asset-management, hedge-fund and private-equity industries.
Tan said he has only given out a handful of offers with separate housing allowances in the past five years.
Housing allowances and other perks herald back to a time when it was more difficult to lure people to Asia. When financial markets in the U.S. and Europe were booming, banks had to provide incentives for people to come to Hong Kong and Singapore, said Mark O’Reilly, Singapore-based managing director for the Asia-Pacific region at Astbury Marsden, a recruitment firm.
After the global financial crisis in 2008, the need to provide incentives to senior candidates to move to Asia diminished because the region’s growth outlook attracted expats looking for jobs, he said.
In September, Singapore said it will widen foreign-worker curbs to professional jobs as the government clamps down on companies that hire overseas talent at the expense of citizens. Companies will be required to advertise positions to Singaporeans before applying for so-called employment passes for foreign professionals.
Foreigners, including those who hold permanent residency, account for 39 percent of Singapore’s 5.4 million people, according to data from the Department of Statistics. That compares with 38 percent last year.
Non-Chinese nationals account for about 6.8 percent of Hong Kong’s 7.1 million population, according to the census report conducted by the city government in 2011. The census doesn’t count foreign-passport holders who have obtained permanent residency in the former British colony as non-residents.
Vacancies for high-end apartments in Hong Kong and Singapore are also rising as expatriate budgets are being trimmed. The vacancy rate for units in Hong Kong with at least 160 square meters was at 14.1 percent at the end of the 2012, up from 10.2 percent a year earlier and the highest since the government began collecting data in 1985.
In Singapore, the vacancy rate of private residential units, where many expats live, rose to 5.6 percent in the three months ended June after two quarters of declines, Savills said. That number is expected to increase further as more new homes are completed, the London-based broker said. The island-state will have 49,487 private residential units ready by 2015, according to the Urban Redevelopment Authority.
“Expat packages are a thing of the past, especially in Hong Kong and Singapore,” said Astbury Marsden’s O’Reilly. “If you want to move here now, you do so on your own steam.”