Hong Kong: Overview
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Hong Kong: property market stalls
Hong Kong’s volatile residential property market has stalled, after a characteristic euphoric surge over the past year.
During the 2nd quarter of 2008, prices fell in several segments of Hong Kong’s property market. Smaller sized apartments (Classes A to C) were especially hit badly; the price of property class C (70 – 99.9 sq. m.) in Kowloon fell 13.5% from the previous quarter.
Hong Kong has been experiencing one of its occasional euphoric property market surges. Residential prices rose by 24.95% during the past year (2007), a sudden pickup after the rather stagnant market conditions prevailing in 2006 (4.1% growth).
Hong Kong’s residential prices are now 91.19% up in the five years to January 2008 (or 81.52% in inflation-adjusted terms).
Nevertheless (April 2008) transaction levels are now falling, and banks have tightened lending - especially to expatriates without HK sourced income. The decline seems to be most visible in the high-end market, which is likely to be most affected by the credit crunch, by firing at investment banks, by a US economic downturn.
Foreigners can generally buy properties such as apartments and condominiums in Hong Kong and rent out without restriction.
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.
TAXES AND COSTS
Last Updated: Dec 10, 2008
Rental income tax is in middle range in Hong Kong
Effective Tax Rate on Rental Income |
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| 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.
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%.
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.
ECONOMIC GROWTH
Last Updated: May 06, 2008
Global slowdown hits Hong Kong's economic growth
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$29,650 in 2007. With 7 million people occupying about 1,100 sq. km., it has also one of the world's highest population densities.
With the global economy slowing down, Hong Kong’s economic growth is quickly losing steam. The economy expanded by 8.05% in 2004, the highest since 1988. It was followed by a 7.08% growth in 2005, 7.02% in 2006 and 6.3% GDP growth in 2007.
The economy is expected to slowdown to 4% in 2008 and 2% in 2009 due to a slowdown in exports and a cutback in financial activities.
Unemployment fell to 3.2% in August 2008, down from 7.9% in 2003 and 4.08% in 2007. However, layoffs from global financial institutions may reverse the drop in the unemployment rate.
Hong Kong's underlying inflation rate was 4.6% y-o-y in August 2008, down from 6.3% in July but still considered high compared with 2% in 2007.
RESIDENTIAL PROPERTY AROUND THE WORLD
Asia & Pacific
Looming housing slump in China
America & Caribbean
The great U.S. housing market crash
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| RESIDENTIAL PROPERTY FACTS | |
| Price (sq.m): $15,424 For a 120 sq. m. property, usually an apartment. | Rental Yield: 3.12% For a 120 sq. m. property, usually an apartment. |
| Rent/month: $4,808 For a 120 sq. m. property. | Income Tax: 12.16% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income. |
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Roundtrip Cost:
2.8%
The total cost of buying and then reselling an apartment. Includes: * all transaction taxes and charges: * lawyers' and notaries' fees * agents' fees Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. |
Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation. |
| Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice. | |
JUNE 2009
MAY 2009
FEBRUARY 2009
- Stalemate in Hong Kong: Few buyers, few sellers - IHT
- Hong Kong Luxury-Home Sales Rise to 6-Month High - Bloomberg
JANUARY 2009
- Hong Kong named world's freest economy - Business Day
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