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: 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.