Hong Kong’s high rents work against plans to bring back top talent
Hong Kong’s astronomical housing rents are likely to be a concern among a certain segment of foreign talent looking to relocate to the city after the government formally launched an aggressive bid to reclaim its spot as Asia’s premier financial hub, according to analysts. The city has offered a slew of incentives such as a refund of the extra stamp duty that non-locals pay when buying Hong Kong residential properties, as long as they remain in Hong Kong for seven years and obtain permanent residence. Other perks include a new two-year visa to individuals who earned no less than HK$2.5 million ($420,300) in the past year and graduates of the world’s top 100 universities with at least three years’ working experience in the previous five years.
There is no limit for the number of visas that can be issued to people from these two groups. Another 10,000 visas per year will be available to those who graduated from a top-100 university in the past five years but have not yet worked for three years.
Just last year, Hong Kong was named the world’s most expensive city for expats, according to US-based consulting firm Mercer, taking into account expenses including housing, transport, food and entertainment. The question now is whether the new incentives offset the higher cost of living in the city, including home rents.
“The cost of living in Hong Kong is indeed quite high, even compared with other metropolitan cities. It certainly has a negative impact on attracting overseas talent to come to the city,” said Maggie Hu, assistant professor of real estate and finance at the Chinese University of Hong Kong. “(But) Hong Kong is a very vibrant city full of opportunities and attractions, which will, to a great extent, offset the concern about expensive rents.”
Until being hit by the one-two punch of social unrest and the Covid-19 pandemic, Hong Kong had consistently topped other global cities in terms of home rents. In 2020, for example, US$10,000 ($13,100) would get a tenant just 1,495 sq ft of space in the city, much smaller than the 2,249 sq ft in New York, 2,591 sq ft in Singapore and 2,899 sq ft in London, according to a report by Knight Frank.
Luxury home rents have since corrected with another decline by as much as 3% expected this year, the property consultancy estimated.
The return of expats from mainland China and the rest of the world is widely perceived as a tonic to Hong Kong’s ailing property market, where office, retail and home rents have been in decline.
Still, agents say that expats should expect to get a smaller space for the same amount that they might pay elsewhere. And while those in the finance and technology sectors may have enough housing allowance to find a suitable home, those in other industries, including aviation, may still be put off.
“I think the financial people will not need worry about rental expenses because they already are paid well enough, but it might be a little bit of concern for people coming from other industries,” said Aradhana Khemaney, head of residential services at Savills, who added that career opportunities, safe environment and low taxes still make Hong Kong an attractive expat destination.
The government received nearly 6,000 applications in the first two weeks of the scheme to attract talent to the city, including 800 from people who met the HK$2.5 million salary requirement, according to Chief Secretary Eric Chan Kwok-ki.
Although it is still too early to tell whether the scheme will be successful, Khemaney said the city has ample housing stock to cater to every need and budget.
“They will have to be on a budget, whether they are on a budget of HK$20,000 or a budget of HK$50,000. Depends at what level they are coming,” she said. “Are they coming as lawyers? Are they coming in the financial field? I think there will be housing for every budget and I think that’s not going to deter the people who want to come.”
If the scheme is successful, it is likely to drive rental prices higher with more demand for upmarket homes, said Buggle Lau Kai-fai, chief analyst at Midland Realty.
While the government has dangled various incentives, Lau believes that shortening the seven-year period of continuous stay in Hong Kong for expats to gain permanent residency will be a big help in luring overseas talent.
“In other parts of the world like Canada, you only need to stay three years full-time, then you’re eligible to become a Canadian citizen,” he said. “Another is to cut the red tape, because it can take a long time for people to apply and eventually work in Hong Kong. It takes a long time to get a visa. Companies need to go through all the hassle and the process to get a visa for overseas talent.”