Hong Kong: Overview

RENTAL YIELDS

Last Updated: Apr 14, 2009

Lower yields in mid level apartments this year

Yields seem to have dropped in Hong Kong. Mid-Levels apartments generate gross rental yields of up to 3.2%, with average yields of 2.98%. These yields are lower than we found when we last surveyed Hong Kong’s residential property market, back in 2007. Then, the Global Property Guide’s research team found average Hong Kong gross rental yields to be 3.65%.

Smaller apartment sizes now have slightly higher yields than larger apartments, as is normal.

The Peak retains its special cachet, as the physical, social, and economic peak of Hong Kong society. Apartments on the Peak cost around US$30,000 per sq. m. Yields on these units are lower than the average for Hong Kong apartments, at 2.09%. The New Territories has the cheapest apartments in Hong Kong, at US$11,000 per sq. m., and its apartments also have the highest gross rental yields, at 3.74%.

It might seem that only a brave buyer would buy in Hong Kong at present low yields. But Hong Kong has experienced low yields for the past twenty years, so the risk may be lower than it appears.

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TAXES AND COSTS

Last Updated: Dec 10, 2008

Rental income tax is in middle range in Hong Kong

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	12.2%	12.2%	12.2%
Click here to see a worked example
Source:			Disclaimer

Rental Income: Net property income is taxed at 15% (previously 16%). Net income is computed by deducting a standard 20% for repairs and outgoings.

Capital Gains: No capital gains tax exists in Hong Kong.

Inheritance: Inheritance tax or estate duty was abolished from February 11, 2006.

Residents: Taxation in Hong Kong is based on the territorial source principle; i.e., where the income was earned. Income derived from outside Hong Kong is not taxed in Hong Kong.

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BUYING GUIDE

Last Updated: Dec 05, 2006

Roundtrip buying costs are low in Hong Kong

The total roundtrip transactions costs of buying and selling an apartment are low, with the maximum scale of charges only 7.8%. This is inclusive of the real estate agent 's fee (0.5% to 1%) and stamp duty (0.75% to 3.75%). Legal fees are around 0.5% to 2%.

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LANDLORD AND TENANT

Last Updated: Jun 20, 2006

Hong Kong law is pro-landlord

Landlords have an easy life in Hong Kong.

Rents: Rents can be freely negotiated in the private sector, which comprises about half of the rental market.

Tenant Security: The Landlord and Tenant (Consolidation) Ordinance 2004 removed security of tenure, i.e. domestic tenants no longer have the statutory rights to renew their tenancy at prevailing market rates.

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ECONOMIC GROWTH

Last Updated: Nov 06, 2009

Out of recession

Hong Kong is a small bustling metropolis, a corporate and financial centre where Western and Eastern influences converge. A former British colony, Hong Kong became a Special Administrative Region of China after Britain’s 99-year lease expired in 1997. It enjoys a high degree of autonomy from China.

Hong Kong has one of the highest GDPs per capita in Asia at US$30,726 in 2008. With 7 million people occupying about 1,100 sq. km., it has also one of the world's highest population densities.

After four consecutive quarters of contraction, the economy grew by 3.3% in Q2 2009 from the previous quarter, lifting Hong Kong out of recession. The December 2008 and May 2009 stimulus packages helped stop the decline in GDP. Overall, the economy is expected to shrink by 2% in 2009 but will bounce back in 2010 with a 5% growth, according to IMF.

The fall in exports and imports slowed to 12.8% and 12.7% in Q2 2009 from the previous year after sliding by 22.7% and 21.4% in Q1 2009.

The decline in private consumption also slowed to 1% in Q2 2009 from the previous quarter, indicating the gradual return of consumer confidence. This followed the 6% drop in private consumption in Q1 2009.

"Price pressures should remain muted and, given our current outlook for global commodity prices, consumer price inflation should end 2010 close to zero," said the International Monetary Fund in its report.

Deflation in Hong Kong began in June 2009 with a 0.9% contraction in prices. In August 2009, the fall in prices accelerated to 1.6%.