Regression analysis shows that there's a strong relationship (R^2 = -0.81) between annualized cumulative real return of HK property (40 months ahead) and the difference between US 10-year treasury yield and property rental yield. Basically, the more rental yield exceeds US 10-year treasury yield, a better buy a property is.
The regression result aligns with general investment valuation; as generated cash flows exceed risk-free rate further, valuation goes up.
Let's use a new development project, Heya Delight, as an example to see how the difference changes as the rent per sq. ft. changes:
US has been rumored to increase interest rate for quite a while, but it's been delayed and delayed again. Let's assume interest rate remains relatively stable in the next 40 months.
The rent per square foot around the area of comparable quality gets as high as $35 / sq ft per month. Each line above shows different rental income.
It looks like a very good buy for the unit with the lowest price per sq ft at $9,790. Even for the unit with the highest price per sq ft, it's still okay if you can get a high enough rent.
I guess many people share the same views. (Well, it doesn't hurt to price the unit at "up to 40 per cent lower than a nearby project.") There are 130 units available for that project with more than 4000 applications submitted for ballot.
Unluckily for me, I didn't get a good draw... I'm 3374th person out of 4127 to get to pick an unit. (-_-")
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