The local luxury residential leasing market in Hong Kong has undergone a period of consolidation since Q3 2008, however, the rental decline of serviced apartments has shown signs of tapering off, according to Colliers International’s Serviced Apartments Overview.

Due to the global financial turmoil and economic slowdown, the luxury residential leasing market has experienced a rental decline of -24.6% between August 2008 and April 2009. The leasing demand has dropped significantly as many corporations implemented different cost-cutting measures such as staff retrenchments and the reduction of housing budgets.

According to the report, the average rental of serviced apartment decreased by -5.4% in Q1 2009 compared to Q4 2008 and by -6.4% in Q4 2008 compared to Q3 2008. However, the pace of decline slowed to -1.7% (month-on-month) in April 2009.

The average rental fall of serviced apartments, registering -12.9% between August 2008 and April 2009, was also less than that of -24.6% for luxury residential leasing property, suggesting that the serviced apartment sector has been relatively more resilient amid the current downturn of the residential leasing market.

Looking ahead, the challenge in the luxury residential leasing market might represent opportunity for the serviced apartment sector, which features flexible lease terms. For example, some occupiers prefer to stay in serviced apartments for a short period of three months or less before they commit to a long lease in standard units when the economy stabilises.