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I am writing this on the way back home to Melbourne after a short stay in Hong Kong. For those who have never been there, one of the first things you notice is the immense density of housing on seemingly every piece of available land that can be built on.

As usual I was very curious with property prices and was blown away with what you can get for your money – or rather – don’t get.

A friend has been living in the heart of Hong Kong for the last 9 months and we were fortunate to get a tour of the local hot spots. One of the places we looked at was the iconic Happy Valley Racecourse which is close to where he lives and works. This was a very interesting area which is the epitome of supply and demand.

If you choose to live here you will be paying (US)$10,000 a month in rent for a pokey 2 bedroom apartment – if you don’t have views of the racecourse.

For glimpses of the track, you’ll pay an extra (US)$5,000 per month for the privilege.

So how much do these same apartments cost if you wish to purchase one?

You are looking at a starting point of about (US)$2m and then it goes steeply upwards. This means that if you owned one of these as an investment you would be receiving a rental yield of 1.6%. That is a lot of money out of pocket if you have borrowed funds to purchase it.

So would it be a good investment?

Some would say that if supply was relatively finite and demand was continually increasing, it should be a good investment and appreciate in value over time – that is if you could afford to hold it for the long term.

But here’s the clanger…

In 1997 China reclaimed ownership from British rule. China agreed to give Hong Kong 50 years of autonomy to preserve its economic and social systems. We are now 20 years into this period and there is uncertainty as to how things will be affected in another 30 years.

In China,  individuals are unable to own land. They can only have a long-term lease of up to 70 years!

So what is going to happen to the property market in Hong Kong?

It seems that no-one knows the answer.

This just highlights how good we have it to invest in Australian property.

  1. Economics – Areas where there is supply and demand issues giving best potential for capital growth.
  2. Investment return – 4-5% compared with 1-2% significantly helping with holding costs.
  3. Political stability – It’s nice to know that your property will be yours until you decide to sell or pass on to your family.

These points are big factors however you still need to follow the smart investing formula.

What do you think will happen to the Hong Kong property market after 2047?

Thankfully yours in Aussie property,

Nick

 


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Nick Holden

Nick Holden is the Founder of Simple Property Investment and an insured, qualified Property Investment Advisor under the ASPIRE Network industry body. He is a Licensed Real Estate Agent, holds a Diploma of Financial Services (Financial Planning) and Cert IV Financial Services (Finance and Mortgage Broking). As there is no 'one size fits all' with property investment, he is on a mission to help ordinary Australians create wealth for their futures with personalised strategies and advice.

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