Concrete Analysis | Why Hong Kong property market continues to entice investors despite yield compression
- Despite yield compression, limited new supply of high-quality real estate in Hong Kong has helped entrench the city’s assets as a safe haven
- The HK$9.845 billion deal for Cityplaza One in Taikoo reflects underlying appetite for trophy assets as Covid-19 pandemic boosts long-term appeal
In Hong Kong, the market yields of different types of residential properties dropped quite notably over the past 10 years, from a range of 2.5 per cent to 3.7 per cent in early 2011, to the current level at 2 per cent to 2.4 per cent, according to data published by the Rating and Valuation Department.
The trend has been similar, but less obvious for non-residential properties in the city during the same period. The market yield of Grade A offices declined to 2.6 per cent from 3.1 per cent, while that of retail properties eroded to 2.7 per cent from 3.1 per cent. It dwindled to 3.1 per cent from 4.1 per cent for industrial premises, mainly in private flatted factory buildings.
The yields for Hong Kong properties are among the lowest in major Asian markets. The average yield for non-residential properties is 4.5 per cent to 5.5 per cent in Tier-1 mainland Chinese cities, and 3.6 per cent to 4.6 per cent in Tokyo, according to data compiled by Knight Frank. They generate 4 per cent to 6 per cent in Singapore, and 6 per cent to 8 per cent in Kuala Lumpur and Jakarta.
