Night skyline view of Singapore
Where there is change, there is opportunity
While no one can accurately predict when the COVID-19 outbreak will be contained, the pandemic has firmly stalled and reversed rising property trends across Hong Kong, Shanghai, and Singapore. AIRINC spoke to industry experts across Asia’s most dynamic business hubs to understand the unique characteristics of each market and what changes and opportunities lie ahead.
At the onset of the outbreak in Wuhan, the Coronavirus epicenter, China moved swiftly to lock down Hubei province and applied very strict social distancing laws across China. We interviewed Adam McWhirter, the Managing Director of Maxxelli Consulting, in the middle of April. He said everything came to a screeching halt before the Chinese New Year holiday when the outbreak was confirmed and his colleagues have only recently resumed showing properties.
Based on his observations and exchanges, Adam found that landlords in Shanghai have lowered rents. They are wary that demand may have weakened since China temporarily closed its border to foreigners.
...landlords in Shanghai have lowered rents. They are wary that demand may have weakened since China temporarily closed its border to foreigners.
While the COVID-19 outbreak has been less widespread in cities like Hong Kong and Singapore due to quick government intervention, the rental markets are showing a decline. As Asia’s leading business hubs, they rely heavily on global macroeconomic factors. Both cities have seen asking rents soften recently due to the collapse of global aviation and international trade, the tightening of local laws to maintain social distancing, and the overall reduction of economic activities.
Singapore Circuit Breaker Tripped
Before the outbreak, Singapore’s rental market was very strong with increasing arrivals of foreign professionals. In the latest data released by the Ministry of Manpower (MOM), a total of 189,000 Employment Passes were approved in 2019 – 3,200 more than the preceding year.
According to Peter Koh of HJ Real Estate, COVID-19 presents a very grim threat to Singapore. The city-state initiated a one-month lockdown effective April 7 to flatten the infection curve, understanding the long-term repercussions and potential damage of a prolonged battle with COVID-19. This government “circuit breaker” strategy restricts movement in the city in order to prevent the spread of disease. In order to sustain its growth trend among its peers, Singapore must be the first one to recover from the pandemic.
The city-state initiated a one-month lockdown effective April 7 to flatten the infection curve, understanding the long-term repercussions and potential damage of a prolonged battle with COVID-19.
Hong Kong Real Estate: Protests and a Pandemic
Hong Kong’s real estate market was already softening before the outbreak due to months of unresolved anti-government protests and political turmoil. Coupled with devastating effects from soured Sino-U.S. trade relations, the territory went into a recession in the last quarter of 2019. The COVID-19 outbreak has further fueled this downward trend.
...the territory went into a recession in the last quarter of 2019. The COVID-19 outbreak has further fueled this downward trend.
According to Joshua Miller, the CEO of Okay.com, one of Hong Kong’s leading online real estate agencies, it is difficult to predict how much further rents will decline as the impact of the pandemic is still being assessed. Another concern he raised is that this could trigger a debt crisis. He also noted that the looming possibility of a vaccine being developed might help reverse some of the damage. For now, it would be best to compare this to the 2008–2009 global financial crisis, where residential rents declined by 25% over the course of 12 months.
For now, it would be best to compare this to the 2008–2009 global financial crisis, where residential rents declined by 25% over the course of 12 months.
What does this mean for your business, your assignees, and expatriate housing?
Professionals are recommending that companies and renters take full advantage of the situation by proactively identifying opportunities in the market. One of the best ways to do this is to work with experienced agents who have solid knowledge of the market. If tenants are looking to renew current leases, they should research comparable units in the market to strengthen their negotiation position. While demand is slow, it is also important to set realistic expectations during rent reviews as it is unlikely for landlords to offer a large discount, especially for an existing lease.
...it is also important to set realistic expectations during rent reviews as it is unlikely for landlords to offer a large discount, especially for an existing lease.
If landlords are unwilling to reduce rent, consider asking for repairs or touch-ups. Tenants should also bear in mind the associated costs that come with finding a new property, such as commission and moving fees.
Peter Koh also recommends that renters be upfront with landlords as the current situation poses a lot of uncertainties and job security issues. Working with tenant-centric real estate agents is also key to clear communication with landlords as we are seeing different types of rental concessions and flexibility.
Knowing that demand is slow, Joshua Miller shared that Hong Kong landlords are currently focused on making their properties more appealing by doing general touch-ups and replacing electrical appliances. In Shanghai, on the other hand, landlords are working with multiple agents to increase their chances of renting out their units as quickly as possible.
Hong Kong landlords are currently focused on making their properties more appealing by doing general touch-ups and replacing electrical appliances.
While vacancy rates are low across all three cities (the current rates are between 5% to 10%), real estate professionals are confident that COVID-19 will present renters and companies with abundant opportunities to optimize their housing strategies.
It is likely that these Asian business hubs will continue to do well post-COVID-19 as this experience has once again showcased the cities’ robustness in managing a crisis of this scale. With strong infrastructure, good governance, and access to world-class medical facilities, these cities will be some of the first places in the world to recover from the COVID-19 pandemic, paving the way for others to recover.
Are you interested in learning more about expatriate housing and how AIRINC can help your business?
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About AIRINC
Listen | Partner | Deliver. For over 60 years, AIRINC has helped clients with the right data, cutting-edge technology, and thought-leading advice needed to effectively deploy talent worldwide. Our industry expertise, solutions, and service enable us to effectively partner with clients to navigate the complexity of today’s global mobility programs. As the market continues to evolve, AIRINC seeks innovative ways to help clients address new workforce globalization challenges, including mobility program assessment metrics and cross-border talent mobility strategy. Our approach is designed with your success in mind. With an understanding of your goals and objectives, we ensure you achieve them. Headquartered in Cambridge, MA, USA, AIRINC has full-service offices in Brussels, London, and Hong Kong. Learn more by clicking here.
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