Hong Kong’s residential property rental returns have reached an all-time high in over a decade and are expected to stay high for the next two to three years, analysts have revealed. This surge is due to a strong demand from new inhabitants and a dip in mortgage costs.

The city’s average rental yield saw a slight increase of 0.04 percentage points to 3.47% as of September’s end, the highest in close to 12.5 years as indicated by the Centa City Rental Index Yield of Centaline Property Agency. This index recorded a rise of 0.38 percentage points in the five months ending in September.

Centaline’s tracking of 138 properties revealed that 22 properties had a rental yield exceeding 4% in September, a jump from the previous month. Remarkably, Kowloon Bay’s Tak Bo Garden achieved a yield of 5.16%, a first since January 2012.

“Rental returns are nearing their peak this year, and there might be a slight decline due to seasonal factors, but it will be marginal,” stated Yeung Ming-yee, a senior associate director at Centaline. She anticipates the figure to be around 3.4% by the end of the year.

Leasing activity is expected to pick up pace after Lunar New Year in 2025 and continue to grow in the subsequent two to three years, albeit at a slower rate. The key factors driving this demand will be individuals delaying home buying due to concerns over declining prices and new residents entering the city under the talent scheme.

Small units, of 430 sq ft or less, saw a yield of 3.7% in September, a 0.6 percentage point increase from the same time in 2023 and the highest in 12.5 years, as per data from Ricacorp Properties, provided by Hong Kong’s Rating and Valuation Department.

Moreover, apartments sized between 431 sq ft and 752 sq ft also observed a yield rise, with an increase of 0.1% to 3.2% in September. These statistics indicate a promising investment landscape for residential properties in Hong Kong.