Three numbers, one formula
The first number is annual rent: monthly rent × 12. The first choice is already hidden here — asking rent or actually achieved rent. A yield built on asking rent is usually more optimistic than one built on what the flat actually let for.
The second number is price: the purchase price, not a valuation or an asking price. Use an asking price and the yield is systematically understated.
The third number is the payback period: price ÷ net annual rent. It is the same fact as the rental yield, stated the other way round — yield is annual rent ÷ price, and payback is its reciprocal.
Take an HK$8M flat at HK$22,000 a month: annual rent is HK$264,000, gross yield is 3.3%, and payback is about 30.3 years (a price-to-rent ratio of about 364 months). Enter the three figures into the rental yield calculator and you get the same set of results.
The trap: basis causes more errors than the formula
Area basis: is the per-square-foot rent on saleable or gross area? For the same flat the two can differ by 20–30%. A yield uses total price, so it looks immune to area — but if you take per-square-foot rent on gross area and put it against a price derived from saleable area, the two sides no longer reconcile.
Rent basis: headline rent (what the tenant pays) and net rent (after management fees, rates, government rent, repairs and vacancy) are two different numbers. Headline rent gives you a gross yield, and many of the '4% yield' claims you hear are gross.
Cost basis: whether rates, government rent and management fees fall on the landlord or the tenant changes net cash flow directly. These are not consistent across buildings or across tenancy agreements.
None of the three is an arithmetic problem. Each is a question of stating which basis you are using. When you quote a yield to a client, adding 'gross, on saleable area, at asking rent' prevents more arguments than any amount of retrospective explanation.
How far gross and net diverge: one worked example
For the same HK$8M flat at HK$22,000 a month, gross yield is 3.3%. Assume management and agency fees take 5% of annual rent, and fixed annual outgoings (rates, government rent, repairs) are HK$12,000: net annual rent is 264,000 − 13,200 − 12,000 = HK$238,800, net yield falls to about 2.99%, and payback stretches from 30.3 years to about 33.5 years.
The whole gap comes from that 5% and that HK$12,000. Both are inputs, not market quotations — they are used here to demonstrate the calculation, and should be replaced with the actual figures for the flat in question.
Vacancy works the same way. Move the vacancy allowance from 0 to one month (about 8.3%) and annual rent and yield fall together. For a flat that sits empty for long stretches, the gap between gross and realised yield is very visible.
Cross-checking against district rent
A single flat's rent is easily distorted by asking rent and by the flat's own condition. To judge whether a yield is reasonable, compare it once against the district as a whole — the district pages on this site carry an average rent per square foot calculated from recorded real lettings, as a directional reference.
Be clear about what that district data is: average rent per square foot is calculated from recorded real lettings (listings excluded), while commute times are this site's own curated measure rather than official statistics. It helps you tell whether an asking rent is out of line; it does not replace your own knowledge of the flat.
Two self-checks
First, confirm where each of the three numbers came from: purchase price, achieved rent or asking rent, and whether annual rent has been adjusted for vacancy.
Second, enter management fees and fixed annual outgoings honestly and look at the gap between net and gross yield. A gap that looks too large usually means one input does not match reality.