Hello All,

I invest in Hong Kong and thought some people might like to learn about this market as it is a way of getting exposure to China more safely.

The laws are landlord friendly and property rights protected. There is no capital gains tax and maximum income tax is 16%. Foreigners can invest easily. It is safe with little crime.

It is a volatile market. From 1997 to 2002 prices fell by 60%, they have now risen to about 50% from the bottom i.e. still cheaper than 1997.

This is not a place to buy new off plan property because these go at a considerable premium to old properties. The local population prefers to buy new and the developers make it easy for them with low deposit financing. However for rentals I would suggest old is better as you can get more space for your money and rental prices depend on space.

There is a large expat community here. Because the economy is booming at the moment, more and more expats are arriving causing restriction of supply and rents to soar. Because rents are going up and expat home markets are overpriced, for the first time in the last 20 years expats are buying in Hong Kong and prices of rental properties in popular areas are increasing. This contrasts with the non investment areas where prices have stagnated since the summer because of the recent interest rate increases.

Hong Kong's best areas for investment are mid-levels and Soho. Other areas to look at are Wanchai, Causeway Bay and Sheung Wan. Soho is particularly popular as it is walking distance to the CBD and has a trendy, alternative vibe.

I own 3 properties in Soho Midlevel area. As an example I have one I bought for HK$1.82 in 2004, spent 600k on renovation and am now getting a rental of HK$25k per month which is about 12% gross. The value has now risen to HK$3m and if I were to renew I would get HK$30k per month.

The interesting thing about HK is that there is limited new supply coming on stream and the developers are very keen to build up their land banks by buying old properties especially in prime areas like Soho and Midlevel. The owners of the block where I own this flat have got together and are currently marketing the block to developers in which case I expect to be bought out at HK$6-8m for my investment. If 90% of owners agree, then the sale will go ahead. To speed up development, the government is currently changing the rules for buildings over 40 years to just 80% of owners.

ismael,

What interest rate are you on up there now for investment properties and what are the requirements for getting a loan.
what is there lvr's and what growth main land is growing at a very high rate and yes you are still on English law but I was of the understanding it was difficult to lend from Hong Kong banks and the rates were different for overseas investors.
Interested in the cost structure of your market.
I think is still needs to correct a far bit to be inline with main land as main land is soon to be a wash with new property and yours is still higher cost base.

Thanks!!