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Hong Kong: Overview

Last Updated: Nov 06, 2009

Hong Kong housing bubble! Mainland buyers blamed

Residential property prices in Hong Kong are bubbling up again, following substantial falls in the second half of 2008.  Hong Kong is riding another euphoric wave of property purchases.

Hong Kong’s housing market was seriously affected by the global financial crisis, but after falling 17% (18% in real terms) from June to December 2008, Hong Kong’s residential price index rebounded and rose by 20% (21% in real terms) from last year’s bottom to August 2009, according to the Ratings and Valuation Department (RVD)

A massive influx of buyers from mainland China has been a partial cause. The Chinese stimulus package of November 2008 boosted liquidity, and cash-rich Chinese, facing restrictions on bringing out capital from China, bought properties in Hong Kong.

Hong Kong Island, Kowloon and the New Territories all saw strong price increases in the first two quarters of 2009. The overall residential price index in Hong Kong rose 8.3% (8.4% in real terms) in Q2 2009.

Foreigners can buy properties such as apartments and condominiums in Hong Kong and rent out without restriction.

Read Price History  »

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.

Read Rental Yields  »

TAXES AND COSTS

Last Updated: Dec 10, 2008

Rental income tax is in middle range in Hong Kong

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.

Read Taxes and Costs  »

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%.

Read Buying Guide  »

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.

Read Landlord and Tenant  »

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%.

 

  • Pro-landlord rental market
  • Low transaction costs
  • Strong & stable economy
  • Moderate rental income tax
  • Low to moderate yields

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.
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.


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