Buy real estate in Asia? Real estate specialists give their investment tips

Hong Kong’s property market has fallen almost 20% since its peak and it could be a good time for homeowners to buy – but investors may want to think again, according to Peter Churchouse, chairman and chief executive of property investment firm Portwood Capital.

With property prices in the city down 15-20% since their peak, now may be a good time to buy property in Hong Kong if you want to own a home, Churchouse said. However, investors looking for yield should look to Australia and New Zealand instead.

Churchhouse emphasized that investors and homeowners have different priorities.

For homeowners looking to buy, “prices this low are probably not a bad time to think about buying,” he said Tuesday on CNBC’s “Squawk Box Asia,” if you can afford it, the mortgage and the deposit to be paid.

“There are still some downside risks… but perhaps the worst is over.”

Hong Kong property prices fell for four months in a row. The official house price index was 339.2 in August, down 7.9% from a year ago and 4.2% from April highs.

“Hong Kong is probably the easiest place in the region to buy from, and I think Japan is probably a close second,” he said.

Buying elsewhere in the region is “fraught with all sorts of difficulties and legal issues… There are all kinds of banana peels,” Churchouse warned, explaining that home buyers in other countries must be either a resident, permanent resident or employee.

“A lot of times as an investor you can’t own a property,” he added.

Jeff Yau, Hong Kong property analyst at DBS Hong Kong, said prices in Hong Kong are expected to continue falling and could fall by another 10% in 2024.

In October, the Hong Kong government cut stamp taxes for property buyers in a bid to boost the city’s declining property market.

Under the relaxed levies, stamp duty residents must pay on property and another levy levied on additional property purchases by residents will each be halved to 7.5%.

Despite the positive news for homebuyers, demand may not recover at full strength as higher financing costs will continue to be a hurdle for would-be homeowners, said Henry Chin, head of Asia Pacific research at CBRE.

For investors looking for high rental yields, “Hong Kong is not the place,” Churchouse said. “The return today is below the cost of capital, below the interest rate you pay on your loan.”

Hong Kong’s rental yield is currently below 3%, while the effective mortgage rate exceeds 4.1%, implying a “negative rental price,” said DBS Bank’s Yau.

“If investors own their first property, they will still have to pay a new residential stamp duty of 7.5% when purchasing a second property,” Yau said. “It’s not a good time to buy real estate as an investment.”

Where can investors find good rental yields?

“The best performing markets in this region, in my opinion, are Australia and New Zealand,” Churchouse said. Yields for residential or commercial properties there can range from 6% to 8% – “maybe even higher,” he added.

Rental yields of around 5 to 6 percent are also common in Japan, he added.

In a country where interest rates are “very, very low,” one can get a rental yield in Japan that is higher than interest costs, he said.

—CNBC’s Clement Tan contributed to this report.