Hong Kong Real Estate Cap Rates

By Bruce Firestone | Architecture

Dec 23

A friend’s 500 sq ft (approximate), 3-room apartment in a Hong Kong tower in a  desirable neighborhood is worth $4 million CAD, but rents for “just” $4,000 a month. 

Cap rate? 

About .8% pa.

Conclusion?

Real estate investing in HK brings poor cash returns, which means CDN real estate looks mighty tempting with cap rates of 3.5% to 6% or more.

You could buy (for $4 million), seven or eight 1,500 to 2,000 sq ft homes in Ottawa, a G7 capital, that are 15-minutes from the Parliamentary Precinct (ie, downtown).

You can add an in-law suite to create a legal duplex or a backyard coach house, and, presto, you are generating around a 6% per annum cap rate (net operating income divided by purchase price + renovations costs). 

Now let’s compare these two options:

image

note: operating costs are guesstimated at 34% of GOI (ie, money spent on repairs, maintenance, property taxes, condo fees, insurance, vacancy allowance, property management (everything except mortgage costs)) 

If you invest your $4 million in an HK apartment, you’ll make about $32k a year after paying off your mortgage.

In Ottawa, you’ll receive around $240,000 a year in NOI (net operating income), seven and a half times more than what you can make in Hong Kong.

It’s no wonder Chinese investors are looking outward and overseas these days.

Prof Bruce 

Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
Century 21 Explorer Realty Inc broker
Ottawa Senators founder
1-613-762-8884
bruce@brucemfirestone.com 
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Image courtesy of: Sakaori (talk) – Own work, CC BY 3.0, https://commons.wikimedia.org/w/index.php?curid=43023528

Tags: hong kong real estate

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Bruce is an entrepreneur/real estate broker/developer/coach/urban guru/keynote speaker/Sens founder/novelist/columnist/peerless husband/dad.

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