Hong Kong rental yields hit 12.5-year high on talent-scheme influx, lower rates

Rental yields for Hong Kong residential properties have hit the highest level in more than a dozen years and are set to remain at an elevated level for two or three years, driven by robust demand from newly arrived residents and reduced mortgage costs, according to analysts.

The average rental yield in the city inched up 0.04 percentage points to 3.47 per cent at the end of September, the highest reading in nearly 12.5 years on Centaline Property Agency’s Centa City Rental Index Yield. The gauge advanced by 0.38 percentage points in the five months ended September.

Of the 138 properties tracked by Centaline, the rental yield for 22 exceeded 4 per cent in September, four more than in August. Tak Bo Garden in Kowloon Bay hit 5.16 per cent yield, the first time a property has topped 5 per cent since January 2012, Centaline data found.

“Rental yields have been almost at peak already this year, and may slide slightly due to the seasonal reasons, but just a bit,” said Yeung Ming-yee, a senior associate director at Centaline. “They will stand at 3.4 per cent by the end of this year.”

Momentum may increase further after Lunar New Year in 2025, when leasing activity typically accelerates, and will continue to rise in the next two to three years, albeit at a slower pace, she said. The main drivers of demand will be people putting off home purchases amid worries about slumping prices and newly arrived residents via the city’s talent scheme, she added.

Small units, measuring 430 sq ft or less, yielded 3.7 per cent in September, 0.6 percentage points higher than the same period in 2023 and the highest in 12.5 years, according to Ricacorp Properties, based on data provided by Hong Kong’s Rating and Valuation Department.

Flats measuring between 431 sq ft and 752 sq ft also recorded a yield increase, rising 0.1 per cent to 3.2 per cent in September, it added.