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Apr 15, 2014

How much longer will Hong Kong property rise?


Last Updated: Apr. 15, 2013
MIDLEVELS -
Apartments
COST (US$) YIELD (p.a.) PRICE/SQ.M. (US$)
TO BUY MONTHLY RENT TO BUY MONTHLY RENT
75 sq. m. 1,798,800 n.a. n.a. 23,984 n.a.
120 sq. m. 2,737,680 6,431 2.82% 22,814 53.59
175 sq. m. 4,649,575 9,525 2.46% 26,569 54.43
250 sq. m. 7,807,250 13,790 2.12% 31,229 55.16
THE PEAK -
Apartments
200 sq. m. 8,572,600 12,500 1,75% 42,863 62.50
500 sq. m. 13,761,650 22,040 1.92% 39,319 62.97
HONG KONG ISLAND - Apartments
75 sq. m. 1,911,600 4,673 2.93% 25,488 62.30
120 sq. m. 3,010,680 6,493 2.59% 25,089 54.11
175 sq. m. 4,940,250 10,029 2.44% 28,230 57.31
300 sq. m. 9,880,800 18,141 2.20% 32,936 60.47
NEW TERRITORIES - Apartments
75 sq. m. 811,350 2,711 4.01% 10,818 36.14
120 sq. m. 1,644,960 4,368 3.19% 13,708 36.40
200 sq. m. 3,086,400 9,048 3.52% 15,432 45.24
KOWLOON TONG -
Apartments
75 sq. m. 1,144,275 3,242 3.40% 15,257 43.22
120 sq. m. 2,042,280 5,110 3.00% 17,019 42.58
200 sq. m. 4,840,400 9,138 2.27% 24,202 45.69
Districts researched:
Midlevels and The Peak are in Hong Kong Island.
Hong Kong Island (other areas): Jardines Lookout , Repulse Bay , Tai Tam, Shouson Hill, and Stanley Beach
New Territories: Clearwater Bay, Sai Kung, Discovery Bay, Gold Coast
Source: Global Property Guide Definitions: Data FAQ See also: Update Schedule

A rising tide lifts all boats…Hong Kong’s property market rose an amazing 13.7% (in inflation adjusted terms) during the year to the end of Q2 2013. Yet rental yields are lowish, with gross rental yields of from 2% on the Peak to 4.6% for a small New Territories apartment.

Given that the Global Property Guide’s figures are for gross rental yields, i.e., do not make any allowance for periods when the apartment is vacant, for legal costs, administration costs, cleaning and repairs, rental taxes, property taxes, and other taxes, etc, it is safe to say that landlords of high-end apartments in Hong Kong earn very little on their apartments.

The latest year’s 13.7% price rise comes after a rise of 3% during the same period in 2012, and an even more amazing 23% during same period the previous year. One worries how much longer this can continue.

Hong Kong is not a ‘typical’ market. It is a place where the rich choose to park assets in the form of apartments, as part of a diversified asset-safeguard strategy - like Monaco and Singapore. Such markets typically have lower rental yields than more ‘normal’ housing markets.






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