Valuer Insights
Can Your Rent Cover Your Mortgage? Unveiling the Truth About Rental Income
March 27, 2025
Contact
Angus Luk
Senior Director, Valuation & Advisory Services, Hong Kong
The latest data on private residential rental and sale prices released by the Rating and Valuation Department for January 2025 indicates a continuing decline in property prices. However, during the traditional off-peak rental season, the rental index is experiencing an upward trend, approaching the historical high recorded in August 2019.
The private residential rental index for January 2025 stands at 192.9 points, reflecting a month-on-month increase of 0.4% and a cumulative rise of 0.8% over the past two months. In contrast, the private residential sale price index is reported at 287.6 points, showing a month-on-month decrease of 0.5%, marking a continuous decline over two months with a cumulative drop of 1.3%. This represents the lowest level since September 2016, reflecting a nearly 30% decline from the historical high of 398.1 points in September 2021.
Interestingly, rental prices have not succumbed to the typical seasonal decline during the Christmas and New Year period; instead, they continue to rise. The current rental index is only approximately 3.5% lower than the historical high of 200.1 points recorded in August 2019. Although a breakthrough to the previous high may not occur in the short term, it is anticipated that the index will approach the second-highest record of 197.6 points from October 2018, which is about 2% away.
According to the latest data from the Rating and Valuation Department, the rental yield for Class A units in January 2025 is 3.6%. With the current mortgage interest rate capped at 3.5%, this indicates that the rental yield for small units is slightly higher than the mortgage rate by approximately 0.1%. However, rental yields for Class B to E units have yet to surpass current mortgage rate levels.
Source: RVD
In recent years, rental performance has remained robust. The Rating and Valuation Department also announced an overall annual increase of 5.8% in the assessable rental value of private residential properties for the 2025-2026 fiscal year. All three areas—Hong Kong Island, Kowloon, and the New Territories—experienced increases, with Kowloon seeing the most significant rise at approximately 6.9%.
To determine whether rental income is sufficient to support mortgage repayment, an analysis was conducted on the latest registered transactions and current market rents. This analysis involved selecting two transactions from popular residential developments across Hong Kong Island, Kowloon, and the New Territories, while examining assessed mortgage repayments (assuming a 70% loan-to-value (LTV) ratio with a 3.5% interest rate over a 30-year term) against the rental income generated.
Hong Kong Island
Four transactions from Kornhill and Taikoo Shing were analyzed, with flat sizes ranging from 479 sq. ft. to 1,121 sq. ft. The rental yields for these units ranged from 3.5% to 3.8%, with unit rents between HK$38 to HK$40. Notably, Flat 6, 4/F, Block N of Kornhill sold for HK$5.7 million with a saleable area of 479 sq. ft., generating a yield of 3.8% when leased at HK$18,000, exceeding mortgage repayment by HK$84. The yields for these developments were equal to or exceeded the effective interest rate of 3.5% by 0.1% to 0.3%.
Source: Land Registry/Agency
Kowloon
Four transactions from Mei Foo Sun Chuen and Whampoa Garden were selected, with flat sizes ranging from 461 sq. ft. to 722 sq. ft. The rental yields ranged from 3.5% to 4.4%, with unit rents between HK$31 to HK$41. The standout transaction was Flat B, 18/F, No. 11 Broadway of Mei Foo Sun Chuen, sold for HK$4.398 million with a saleable area of 481 sq. ft., yielding 4.4% when leased at HK$16,000, exceeding mortgage repayment by HK$2,176. The yields for these developments ranged from 0.2% to 0.9% above the effective interest rate.
Source: Land Registry/Agency
New Territories
our transactions from Kingswood Villas and City One Shatin were examined, with deal prices ranging from HK$3.8 million to HK$5.85 million for flat sizes from 285 to 557 sq. ft. The rental yields ranged from 3.6% to 4.3%, with unit rents between HK$23 to HK$40. A notable transaction was Flat E, 9/F, Block 50 of City One Shatin, sold for HK$3.9 million with a saleable area of 285 sq. ft., generating a yield of 4.3% when leased at HK$14,000, exceeding mortgage repayment by HK$1,742. The yields for these developments were all above the effective interest rate by 0.1% to 0.7%.
Source: Land Registry/Agency
Islands
Four transactions from Caribbean Coast and Park Island were selected, with deal prices ranging from HK$4.419 million to HK$6.95 million for flat sizes from 377 to 738 sq. ft. The rental yields ranged from 3.7% to 4%, with unit rents between HK$31 to HK$37. Two transactions from Caribbean Coast generated yields of 4% when leased at HK$18,000 and HK$23,000, exceeding mortgage repayment by over HK$1,000. The yields for these developments were all above the effective interest rate by 0.2% to 0.5%.
Source: Land Registry/Agency
Overall, the demand for rental properties remains strong, supported by various tenant groups, including professionals and students. Despite expectations that the Government Budget may bring positive developments for the property market—especially for first-time buyers and investors due to the relaxation of stamp duty for properties under HK$4 million—the rental market is poised for steady growth. As rental prices continue to rise, it appears that rental income is increasingly sufficient to support mortgage repayments, particularly for smaller units, suggesting a favourable outlook for both landlords and prospective investors in the residential property market.
The private residential rental index for January 2025 stands at 192.9 points, reflecting a month-on-month increase of 0.4% and a cumulative rise of 0.8% over the past two months. In contrast, the private residential sale price index is reported at 287.6 points, showing a month-on-month decrease of 0.5%, marking a continuous decline over two months with a cumulative drop of 1.3%. This represents the lowest level since September 2016, reflecting a nearly 30% decline from the historical high of 398.1 points in September 2021.
Interestingly, rental prices have not succumbed to the typical seasonal decline during the Christmas and New Year period; instead, they continue to rise. The current rental index is only approximately 3.5% lower than the historical high of 200.1 points recorded in August 2019. Although a breakthrough to the previous high may not occur in the short term, it is anticipated that the index will approach the second-highest record of 197.6 points from October 2018, which is about 2% away.
According to the latest data from the Rating and Valuation Department, the rental yield for Class A units in January 2025 is 3.6%. With the current mortgage interest rate capped at 3.5%, this indicates that the rental yield for small units is slightly higher than the mortgage rate by approximately 0.1%. However, rental yields for Class B to E units have yet to surpass current mortgage rate levels.
Source: RVD
In recent years, rental performance has remained robust. The Rating and Valuation Department also announced an overall annual increase of 5.8% in the assessable rental value of private residential properties for the 2025-2026 fiscal year. All three areas—Hong Kong Island, Kowloon, and the New Territories—experienced increases, with Kowloon seeing the most significant rise at approximately 6.9%.
To determine whether rental income is sufficient to support mortgage repayment, an analysis was conducted on the latest registered transactions and current market rents. This analysis involved selecting two transactions from popular residential developments across Hong Kong Island, Kowloon, and the New Territories, while examining assessed mortgage repayments (assuming a 70% loan-to-value (LTV) ratio with a 3.5% interest rate over a 30-year term) against the rental income generated.
Hong Kong Island
Four transactions from Kornhill and Taikoo Shing were analyzed, with flat sizes ranging from 479 sq. ft. to 1,121 sq. ft. The rental yields for these units ranged from 3.5% to 3.8%, with unit rents between HK$38 to HK$40. Notably, Flat 6, 4/F, Block N of Kornhill sold for HK$5.7 million with a saleable area of 479 sq. ft., generating a yield of 3.8% when leased at HK$18,000, exceeding mortgage repayment by HK$84. The yields for these developments were equal to or exceeded the effective interest rate of 3.5% by 0.1% to 0.3%.
Source: Land Registry/Agency
Kowloon
Four transactions from Mei Foo Sun Chuen and Whampoa Garden were selected, with flat sizes ranging from 461 sq. ft. to 722 sq. ft. The rental yields ranged from 3.5% to 4.4%, with unit rents between HK$31 to HK$41. The standout transaction was Flat B, 18/F, No. 11 Broadway of Mei Foo Sun Chuen, sold for HK$4.398 million with a saleable area of 481 sq. ft., yielding 4.4% when leased at HK$16,000, exceeding mortgage repayment by HK$2,176. The yields for these developments ranged from 0.2% to 0.9% above the effective interest rate.
Source: Land Registry/Agency
New Territories
our transactions from Kingswood Villas and City One Shatin were examined, with deal prices ranging from HK$3.8 million to HK$5.85 million for flat sizes from 285 to 557 sq. ft. The rental yields ranged from 3.6% to 4.3%, with unit rents between HK$23 to HK$40. A notable transaction was Flat E, 9/F, Block 50 of City One Shatin, sold for HK$3.9 million with a saleable area of 285 sq. ft., generating a yield of 4.3% when leased at HK$14,000, exceeding mortgage repayment by HK$1,742. The yields for these developments were all above the effective interest rate by 0.1% to 0.7%.
Source: Land Registry/Agency
Islands
Four transactions from Caribbean Coast and Park Island were selected, with deal prices ranging from HK$4.419 million to HK$6.95 million for flat sizes from 377 to 738 sq. ft. The rental yields ranged from 3.7% to 4%, with unit rents between HK$31 to HK$37. Two transactions from Caribbean Coast generated yields of 4% when leased at HK$18,000 and HK$23,000, exceeding mortgage repayment by over HK$1,000. The yields for these developments were all above the effective interest rate by 0.2% to 0.5%.
Source: Land Registry/Agency
Overall, the demand for rental properties remains strong, supported by various tenant groups, including professionals and students. Despite expectations that the Government Budget may bring positive developments for the property market—especially for first-time buyers and investors due to the relaxation of stamp duty for properties under HK$4 million—the rental market is poised for steady growth. As rental prices continue to rise, it appears that rental income is increasingly sufficient to support mortgage repayments, particularly for smaller units, suggesting a favourable outlook for both landlords and prospective investors in the residential property market.