New Horizons
Traditional favourites Mid-levels, Repulse Bay and The Peak are falling off the expatriate luxury radar, thanks to bigger homes and better schools elsewhere.
Traditional favourites Mid-levels, Repulse Bay and The Peak are falling off the expatriate luxury radar, thanks to bigger homes and better schools elsewhere.
Just a few years ago it was hard to imagine that traditionally luxury residential locations such as Repulse Bay in southside and Mid-levels, a few minutes uphill from Hong Kong's core business district in Central, could fall out of favour with expatriate executives and affluent locals. But they have—to a degree. While there is still plenty of demand for luxury in those stalwart locations, expanding transit infrastructure, increasing residential supply and, perhaps most crucially, broadening school networks are offering options and luring families away from those until-now dominant districts.
Out and Away
To say that The Peak, Mid-levels and southside sub-markets were crashing is simply wrong. All three are still experiencing strong leasing demand, particularly with luxury leasing beginning to flirt with a supply crunch of its own. They represent Hong Kong's most mature, recognisable and connected luxury districts, they are among the city's most prestigious neighbourhoods and they boast strong international school networks. Similarly, Discovery Bay and Sai Kung are popular choices for families seeking a more community-focused lifestyle surrounded by a more natural environment. School placements, however, have long been an issue for families relocating to Hong Kong, and indeed local families preparing to send children to overseas universities, and locations such as Tseung Kwan O and Tai Po are gaining traction for the availability of a wider array of larger flats as well as four international school openings from 2018 to 2020: Tseung Kwan O welcomed Shrewsbury International School and an extended campus of French International School of Hong Kong, while Malvern College and American School Hong Kong opened in Tai Po. With expats unbothered by commutes into key business districts, the lifestyle and space these districts offer are demanding attention. Additionally, despite “the school network or the living environment [being] the major factors for choosing homes … the decentralisation of offices could be one of the considerations for families to relocate,” theorises Rosanna Tang, head of research at Colliers International, Hong Kong and Southern China.
Cathie Chung, senior director of research at JLL, agrees, stating that “the decentralisation trend in office sectors also mean living in New Territories East, such as Tseung Kwan O, Sai Kung and Tai Po can be more appealing to office workers.”
Infrastructure like the Central-wan Chai Bypass, the planned improvements to Hiram's Highway in Sai Kung and the Shatin to Central railway link will make commutes faster and easier.
The drop-off in expatriate executive staff and reduced remuneration packages up to 2016 has been well documented, but that trend may be taking a turn for the better. While multinational corporations (MNCS) have tightened their belts, expatriates who arrived in 2018 did so with 3% (on average) pay increases, and middle managers were earning roughly HK$2 million per year including benefits, representing increased employer rental and educational allowances. That has contributed to a spike in luxury rental demand. “While these districts remain popular, new international school campuses and high new supplies of housing in Kowloon and the New Territories are garnering attention from professionals and expatriates looking to lease larger flats,” according to Colliers International's The Evolving Residential Market in June.
Cost Versus Value
Mid-levels and The Peak remain the height of prestige for expats, and Hongkongers “with higher affordability” also prefer these traditional luxury districts on the island according to Tang. However, more and more are willing to give up status for more space and a good school. The numbers favour the New Territories as well. In 2019 and 2020, new residential supply in Tai Po (over 7,500 units) and Sai Kung (including Tseung Kwan O, 6,500)—which represents just shy of 35% of the SAR'S new supply for those years—will far outstrip that of Sha Tin, Island East, Central and Western and even Yuen Long districts. Of those, 581 flats in Tai Po will be up to 1,720 square feet in size. Only southside will have a significant number of units over 1,720 square feet (270).
As of June, Tseung Kwan O and Tai Po combined had a relative wealth of flats renting for HK$60,000 per month too, and the spread between Hong Kong Island, Kowloon and the New Territories on larger flats was substantial. “A three-bedroom apartment on Hong Kong Island could cost 60 to 80% more than that in the New Territories,” said Colliers. “With a monthly rent of about HK$40,000, tenants can choose between a two-bedroom luxury flat at Bel-air in Pok Fu Lam or a three-bedroom luxury flat at Mount Pavilia in Sai Kung.”
If rental rates weren't enough of an incentive, school fees could add to the appeal of emergent New Territories districts. Tuitions for Year 1 students in Tseung Kwan O and Tai Po run between HK$80,000 and HK$200,000. Premium schools on the Island and in Kowloon start at HK$120,000 according to Colliers' research. All of that means the future is heading away from Hong Kong Island, if not completely abandoning it. Chung concludes, “Looking ahead, corporates' rental budgets will continue to be tight—we expect the trend of New Territories luxury homes increasing in popularity to continue, given the bulk of new residential supply along with improving accessibility in the New Territories.”