- Peter Churchhouse of Portwood Capital says now may be a good time to buy property in Hong Kong if you want to own a home, as property prices in the city have fallen 15-20% from their peak. He said no.
- But if investors are looking for high rental yields, “Hong Kong is not the place”, he said, adding that markets in Australia and New Zealand looked attractive.
According to DBS Hong Kong, Hong Kong house prices could fall by another 10% in 2024.
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With Hong Kong’s property market down nearly 20% from its peak, it may be a good time for homeowners to buy, but Peter Churchuse, chairman and managing director of real estate investment firm Portwood Capital Investors may want to think twice.
Hong Kong property prices are down 15-20% from their peak, so now may be a good time to buy Hong Kong property if you’re thinking of owning a home, but investors looking for yield should look to Australia and Hong Kong. Churchhouse said it’s worth noting. New Zealand instead.
Churchhouse noted that investors and homeowners have different priorities.
He told CNBC’s “Squawk Box Asia” on Tuesday that for prospective homeowners, if they can afford the mortgage and down payment, “even with prices this low, it’s still a good idea to buy.” “It’s probably not a bad time to consider it.”
“There is still some downside risk, but the worst is probably over.”
Hong Kong house prices have fallen for the fourth consecutive month. The official house price index in August was 339.2, down 7.9% year-on-year and 4.2% from April’s peak..
“Hong Kong is probably the easiest place to buy in the region, and I think Japan is probably close as well,” he said.
Buying a home elsewhere in the region comes with “all kinds of difficulties and legal issues… There are all kinds of banana peels,” Churchhouse warned, adding that homebuyers in other countries They explained that they must be either residents, permanent residents, or employees.
“In many cases, you can’t own property as an investor,” he added.
Jeff Yau, Hong Kong real estate analyst at DBS Hong Kong, said prices in Hong Kong are expected to continue to fall sharply, with a possible further 10% fall in 2024.
In October, the Hong Kong government lowered stamp duty for property buyers in a bid to revitalize Hong Kong’s sluggish real estate market.
Among the taxes being eased, stamp duty paid by non-permanent residents on real estate and taxes levied on residents when they purchase additional real estate will each be halved to 7.5%.
Despite the positive news for homebuyers, demand is unlikely to fully recover as rising financing costs remain an obstacle for potential homeowners, said Henry Chin, CBRE’s head of Asia Pacific research. He said there is a possibility that he won’t.
For investors looking for high rental yields, “Hong Kong is not the place to be”, Churchhouse said. “Yields today are lower than the cost of capital and lower than the interest rates you pay on your loans.”
DBS Bank’s Yau said Hong Kong’s rental yields are currently below 3%, but the effective interest rate on mortgages is above 4.1%, suggesting “negative rental carry”. .
“Even if an investor owns the first property, if they buy a second property, they will still need to pay the 7.5% new home stamp duty,” Mr Yau said. “It’s not a good time to buy investment property.”
Where can investors find good rental yields?
“I tend to think that the highest yielding markets in the region are Australia and New Zealand,” Mr Churchhouse said. Yields on residential and commercial real estate could reach 6% to 8%, “and maybe even higher,” he added.
Even in Japan, rental yields are generally around 5% to 6%.
In countries where interest rates are “very low,” “in Japan you can get rental yields that are higher than interest rates,” he said.
—CNBC’s Clement Tan contributed to this report.