Anyone looking at HK Property

Hi I'm an Aussie thats living in HK for the past 3 years having made my first purchase in property here 2 years ago.

Just wondering is anyone looking at the numbers on property here? Sure its run but purely from anumbers perspective very attractive. Yields are ~4% (higher if u rennovate and labour cost is cheap here u can modernise an apartment for ~35k AUD), and interest rates are as low as 0.8% to 2.15% depending on what loan you take. The key is HKD is pegged to USD so rates here are following US rates.

On a purecashflow modelleing perspective 4% yield vs 2.15% financing is very attractive even pricing in future rate increases (you can fix for 10 years I believe at 3.5% as well if u would like).

On a long term growth perspective HK has a fundamental disconnect where assets are priced in a currnecy thats pegged to USD and the values of the assets follow china growth.

What are the risks? Minimal in my case, interest rate risk which can be minimised by fixing your rate. Volatility of HK prices. They have rallied 30% in the past year dropping 30% in the GFC. Sure very volatilte if your yield / cashflow is finejust don't look at it and look long term. Volaility of rents? THis hit me slightly in GFC My apartment rented for 25% less hurting cashflow a bit. But from my modeeling this managable I have an estimated floor for rent and I can take -ve cashflow for the short term...

I've bought my first considering buying my 2nd (I still hold onto 2 aussie properties as I plan to return home at some stage). Thoughts on this?

Cheers
 
Sonic,

where in Hong Kong did you buy 2 years ago? What did you pay?How old is the building?

I lived in Causeway Bay for a few months just before the handover. Prices were silly at this time..property was very expensive and everyone was speculating. Real estate agents setting up everywhere.

I think finance could be an issue if you weren't living/working in Hong Kong (most of us on this forum).
 
Sonic,

where in Hong Kong did you buy 2 years ago? What did you pay?How old is the building?

I lived in Causeway Bay for a few months just before the handover. Prices were silly at this time..property was very expensive and everyone was speculating. Real estate agents setting up everywhere.

I think finance could be an issue if you weren't living/working in Hong Kong (most of us on this forum).

In an area called Sai Ying Poon I believe its the next growth area new MTR station lots of new developments 15 mins walk to Soho.

I paid $3.46 HKD for a 656 square foot place. Expensive by Aussie standards but HK properties are small and you have to take that into account.

Interesting you flag the handover (1997) that was the mother of all HK property bubbles. I did the research before I bought at that time yields ~1% financing up as high as 10%. ridiculous. Prices STILL have not recovered to 1997 highs 12 years later.

I mean you never know we could be in a bubble now... BUt my assessment. No. Unless variables change wildy when yields are at 4% and finance is 2% and affordability ratios as below historical averages I think the risk of buying at the top of a bubble are minimised.

Fully understand the difficulty of investing overseas. Just flagging as an interesting area to look at (given how savvy aussie property investors are in #'s compared to the rest of the world), I thought I'd flag because seriously on a strictly numbers perspective opportunity looks good.

I'm also asking for selfish reasons :) I'm a massive HK property bull for the LONG TERM I'm hoping someone can point out flaws in my arguements so I get a more rounded view. hehe.

Thanks for taking the time to post.
 
oh and on finance i havne't checked as i live here but i imagine if one desired there are always ways... top of my head ANZ, commonwealth and westpac and NAB all have branches out here... best an ex-british colony and all.
 
The biggest risk with HK is that at the upper end, a lot of the buyers are not home owners but investors. The money from the "train" (as you would know) seems to be to be pushing prices up too quickly. Some of these apartments and penthouses in the upper end are often empty - ie yield is not even important consideration since people are just flipping. This sort of money can come and go in waves.

My folks were looking at a place around 3-4 months ago in Wong Chuk Hang, which is just sotuh of Aberdeen if you don't know where. The place was bought for around $8m by this person in around June, and when we asked in Oct the price tag was already $13m. We thought it was a bit of a hefty jump so didn't go in on it - someone else ended up taking it.

I think Sai Ying Pun is a reasonable area though. Wouldn't worry too much about the MTR, since you're past Sheung Wan anyway (which is a pretty fringe station of the original set imo). Back end is Mid-Levels too.
 
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