In my opinion, the market's a bit hot for my liking. As a poster said above, he's positively geared at 1.2% financing, but you can't get that financing any more.
Most financing deals are in the mid to high 2s now and yields have come down to very low 3s. Downpayment requirements are too high. 60% deposit for locals investing, 50% if you're not living there. 40% if you invest in over AUD$200k properties. There's no interest only loans.
In other words, it's a significant cash drain. You need to put in significant capital, there's tough restrictions on selling (via very high selling stamp duty), there's no cash coming in to your bank before you sell (because you can't do interest only loan). If you buy a AUD$500k apartment, you need to put down around AUD$300k downpayment to be cashflow neutral (post interest and compulsory repayments). If the apartment went up 20%, you gain $100k, which is a 30% return on your $300k. ROE of 30%.
If you put down 20% downpayment in Australia and are cashflow neutral, a 20% appreciation (which looks like its around the corner) means you've doubled your equity. ROE of 100%.
As usual, it's just a numbers game, and provided you take a certain view on currency (ie that it will stay flat in the foreseeable 24 months), the smart money is probably coming back. If you're not local, don't even bother to buy as you pay extra 15% stamp duty.
HK is worth revisiting when these silly stamp duties are scrapped. But most importantly, it's probably only worth revisiting when the banks relax lending standards (ie can gear at 90%). Another way to look at it is with A$300k, I can buy a relatively medicore A$500k apartment in HK (middle class) and that's it. When it booms (well it already has boomed a lot, but if it boomed more), I'll make a bit of money off a A$500k apartment. With the same money in Australia, I can buy a A$1.5m-A$2.0m house, and when it booms I can make more money. Both probably are neutral cashflow although the latter is more likely to be positive.