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13/06/2011

People are talking less about high residential property prices, as this has been the situation for some time. The new hot topic among the middle-class is rent - which is also soaring.
 
In the past, rental levels didn't necessarily rise in tandem with home prices. The two sometimes went in different directions.
 
This has changed recently, with rents jumping along with flat prices. To understand the situation, one has to look at the latest market conditions. Of note is that while home prices are escalating, transaction numbers are falling.
 
Fewer owners are selling, as they don't want to be locked in for two years by the anti-speculation stamp duty if they have to buy again. With fewer homes for sale, the rental inventory should go up, while rents come down. However, this isn't what's happening.
 
A few of my friends' leases are up for renewal, and their landlords are jacking up the rents by 20 to 30 percent.
 
There are a few theories on the bullish rental market.
 
Some say demand is driven up by more young people moving out on their own. Others believe landlords boost rents to maintain the level of return on their investment to match higher property prices.
 
Still others blame mainland buyers who leave their properties vacant, causing rental supply to drop.
 
But veteran investors insist the rate of rent increases this year just ``appears'' to be high, because adjustments have been slow for many years.
 
Before the handover, property prices went wild; mortgage rates were high, as was the cost of owning rental property. Rents at the time were no different than they are now.
 
But the financial tsunami has had a depressing effect on rents, keeping them at levels no higher than that of more than a decade ago, lagging behind the rate of inflation.
 
Rents, the investors say, are only now just catching up with property prices, which have gradually returned to the 1997 levels, but the return on investment on rental property is still considered low.
 
So whether rents are going up fast or slow depends on whether you're asking the landlord or tenant.

SOURCE: THE STANDARD



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