Mid-Levels, perhaps more than any other tony part of Hong Kong, is synonymous with high-powered professionals — usually in the banking sector — luxury apartments and top notch schools. An outdoor escalator was built to accommodate residents and if that doesn’t scream power and prestige not much does. But as the property market cycles in and out of peaks and valleys, Mid-Levels more than anywhere can be affected by the slightest turn.
Centre of it All
Bordered by Caine and Bonham Roads on the north and Conduit Road in the south, Mid-Levels stretches from Admiralty over to Sai Ying Pun. The entire area technically includes Hong Kong Park, the Zoological and Botanical Gardens and the Visual Arts Centre, and among the high profile schools are HKU, King’s College, ESF’s flagship Island School, St Joseph’s and St Paul’s colleges as well as a raft of public schools. Combined with a good deal more greenery and slightly cleaner air than in the SAR’s more compact neighbourhoods it’s no surprise it’s become a destination for expatriate residents as well as locals who can afford Mid-Levels’ traditionally premium prices. Mid-Levels is also the preferred residential destination for overseas professionals in Hong Kong for contract work, as evidenced by the sheer volume of serviced apartments in the Mids, among them D’Home, Hanlun Habitats, Oakwood and Signature Homes. Central and Admiralty are literally a few minutes away.
Most agencies — Colliers, Jones Lang LaSalle, Knight Frank, Savills — agree prices are likely to continue their tumble from last year on the back of 2013’s stamp duties and, more crucially, major multinationals (finally) practising restraint and cutting back on fat housing budgets. As noted by JLL and Colliers in recent weeks, tenants are relocating from Mid-Levels and Repulse Bay to spots like Discovery Bay and Sai Kung. On average, tenants get more bang for the buck in DB than in Mid-Levels. “Absolutely. You get more square footage. We’ve had people moving in from Stanley because they like the community feel and they want or need the space,” says DB specialist Stephanie Gräfin vom Hagen, a consultant with Hong Kong Sotheby’s International Realty. “In that respect DB is an attractive area to invest in, particularly two- or three-bedroom apartments because it’s so family orientated,” Gräfin vom Hagen adds.
Luxury prices were off 7.3 percent in 2013 (according to a January Savills residential brief) from their peaks in 2011, and rents will drop about the same amount in the coming months. With the $10 million-plus market segment the most affected Mid-Levels is looking at a slow year. But it’s not completely dead and it is holding up better than other parts of the city. “Transactions in Mid-Levels average around 10 per month. Given fewer second hand homes are put on market, as soon as owners cut the prices, buyers close the deals quickly,” points out Hong Kong Property’s associate sales director Christina Cho.
Still the One
“Buyers [now] are mainly local Chinese or expats who are permanent residents, and a few Mainland Chinese for the top end luxury,” says Marco Au at Oasis Property. “Tenants are expats — bankers, staff at international firms — and families with children prefer Mid-Levels for the schools, easy access to offices, which is especially important for the newly-arrived expats.” Cho goes further, adding, “The government’s property cooling measures have deterred most mainland investors from buying Hong Kong properties. The second hand market is pre-dominantly driven by end-users, particularly branch families,” she explains, noting rentals are still dominated by local and overseas senior corporate executives.
So with investor sentiment weak, is the traditionally strong Mid-Levels still a good buy should an investor wade into the market anyway? The downsizing in the financial sector is hitting everyone. “Downsizing started early last year, and even big landlords like Sun Hung Kai have lowered their rents,” notes Au. Cho points out that volumes and prices in Mid-Levels have dwindled. “Rents in the luxury market dropped 15 to 20 percent. Properties that rent at $80,000 to $200,000 per month are the most badly affected. Property owners ask lower rental prices but are still not able to rent them out. Properties that rent at around $30,000 are most attractive to tenants with lower housing budgets. Home demand for this rental range is growing,” she says.
So if rental properties are offering even lower yields than Hong Kong’s typical 2 to 3 percent, is it still worth investing? The short answer is yes, as, “Mid-Levels is still the preferred choice for most [up-market] tenants,” says Au. Cho is also of the mind that the area still has strong investment value. One of the area’s few new projects is Cheung Kong’s Borrett Road property, which could have an impact on both transactions and prices when the time comes. “With limited new supply, prices remain resilient despites developers’ beneficiary packages. As a privileged address and continuous demand, home prices remain resilient amid gloomy property conditions,” states Cho. Mid-Levels is still a great location with strong local infrastructure, it’s well connected, and the chance of having a view of the harbour exists. As Cho finishes: “It all makes Mid-Levels a good property investment location.”