Lower salaries for expats are forcing luxury apartment landlords to cut rents in two of the cities with the most expensive cost of living.
Profits for Asia Pacific banks based in Hong Kong and Singapore find growth is choked by difficult economic conditions and as a result are paying expats less.
As a result, rents have dropped year-on-year in both major financial centres for the third year running, according to international property consultant Jones Lang LaSalle.
Hong Kong rents slipped another 1.1% in the first six months of the year – bringing falls to a total of 13% since October 2011. Some letting agents fear rents could fall by up to another 10% during the next few months.
Rents in Singapore tell a similar story – down 0.2% to £2.40 a square foot for the second quarter, the lowest level since December 2009, according to another property firm, Savills.
Axing more jobs
Both property firms say banks are scaling back in the Asia Pacific, especially giants like Morgan Stanley and Barclays.
Not only are banks cutting jobs, but they are axing payments for expats living expenses.
The main trigger is cited as a slowdown in economic growth in China.
Hong Kong and Singapore have long taken top spots in studies of expat living costs, along with London, New York and Zurich, Switzerland.
All are recognised financial centres.
“Financial services are in turmoil in the Asia Pacific and we still expect a lot of job and salary adjustment to come as the banks realign their strategies in the region. This is softening rents, especially for the most expensive homes,” said a Savills spokesman.
Market full circle
Hong Kong investment bankers are earning an average housing allowance of £5,000 a month, compared with just over £6,000 five years ago, says Savills.
In Singapore, the rate has dropped from £2,500 a month to £1,500 a month.
Morgan Stanley has cut 55 to investment-banking jobs in the Asia-Pacific, while Barclays is rumoured to be axing at least 15 % investment-banking posts in January.
“Bankers and landlords have to readjust their expectations,” said the Savills spokesman. “Some have to move off Hong Kong Island to less expensive neighbourhoods in li9ne with their falling local living allowances.
“The market has turned full circle, because banks had to pay extra allowances to lure the best talent to the Asia Pacific years ago, now they can afford to cut rates because they have fewer posts.”