EAQE Property valuation question: office floor produces net rent of HK$480,000 a year

EAA EAQEProperty valuation

An office floor produces net rent of HK$480,000 a year. The valuer adopts 20 Years' Purchase in perpetuity. What market yield does that imply, and what is the capital value?

A Yield 5%; value HK$9,600,000
B Yield 20%; value HK$2,400,000
C Yield 2%; value HK$24,000,000
D Yield 5%; value HK$4,800,000

Show the answer and explanation

Answer: A. Yield 5%; value HK$9,600,000

Answer: Yield 5%; value HK$9,600,000. Working: 1. Years' Purchase in perpetuity = 1 ÷ yield, so yield = 1 ÷ 20 = 5%. 2. Capital value = HK$480,000 × 20 = HK$9,600,000. Why not the others: - 20% and HK$2,400,000: This treats the YP figure as the yield. - 2% and HK$24,000,000: Wrong yield, and the value does not follow from 20 YP. - 5% and HK$4,800,000: The yield is right but the value uses 10 YP. Rule: Years' Purchase in perpetuity is the reciprocal of the yield; capital value = net annual income × YP. Source: EAA, A Study Guide to Estate Agency Law and Practice, Part 6, para 9; as at Oct 2026

Common mistake

Confusing Years' Purchase with the yield percentage.

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EAQE Property valuation question: office floor produces net rent of HK$480,000 a year

Answer: A. Yield 5%; value HK$9,600,000

Common mistake

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EAQE Property valuation question: office floor produces net rent of HK$480,000 a year

Answer: A. Yield 5%; value HK$9,600,000

Common mistake

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