To buy or not to buy

[eggraid]

Hi Guys
Just wanted to get some opinions from guys that have had to make the decision in the past.

I'm joining the company soon and will be moving to Hong Kong. Want to know if A. Is it possible to purchase an apartment on an SO housing allowance? and B. Is it better to start building equity in a purchase immediately or should one wait the 2 years untill the allowance goes up (almost double from SO to JFO from what I understand). The way I interpret it is that a mortgage is sponsered for a cumulative of 15 years. Can you keep upgrading your mortgage to the maximum as the allowances increase with position upgrade? Finally what are the opinions on the investment value in the Hong Kong real estate market? Where is the best area to buy in?

Thanks Egg

[goingdown]

I am in the same boat as eggraid,please,we need help

[Dan Winterland]

I can't comment on the CX SO house purchase scheme, but from what I know of the CX SO rent allowance, It won't buy you much.

Propery priced are going up daily in HK, in some areas there has been a 100% increase in two years! These days, the estate agents (realators) don't even bother changing the house details in the windows. They just cross the old price out and write the higher one in.

The HK property market is a strange one. The Governemt own most of the land which is released for developement and they don't do it often. despite this, there is not a shortage of property to buy. These price hikes are being fuelled by speculation whereas in most countries, a shortage of properties to buy usually precipitates inflation in the housing market. Couple this with the fact that property depreciates here - you are unlikely to get a mortgage on a property over 30 years old, you are faced with a market very different to the one you are used to at home.

Despite these rises, the market has not yet got back up to the levels of 1997 (since then we have had the Asian economic slowdown and SARS) it's probably about 75% in most parts of HK. This of course means there have been some spectacular drops in this volatile market. I know people who saw their house value fall by 70%. Yes, you read it right - 70%! If you paid a million US for your house, you proabably got no sleep for several years. Another crisis such as a bird flu outbreak could send them down again.

A quick check of the prices in Discovery Bay (a popular place to live for pilots) shows a range of 1.9M HK$ (245,000 US$) for a 496' highrise flat with a balcony to 38M HK$ (4.9M US$) for a 5200' house.

A typical pilot's family home is a 1310' lowrise flat advertised at 8.5M HK$ (1.1M US$). Add to this, you have to put down a minimum 10% deposit, pay 3.75% stamp duty (government tax) on houses over 6.6M HK$ and pay the estate agent 1% comission - even as a buyer.

The HK housing market is not for the faint hearted!

[cx007]

In Hong Kong you can rent a nice house with garden in the new territories for about 6K HKD a month (only a single floor of 3 floors). Transport is never a problem there. It will take you about an hour to get to the airport.

[brisbanehome]

Of course you can buy/rent a place easy with an S/O's allowance, but you have to remember something.........you CANT compare HK to where you are coming from.

If you intend on living in a 4000sq ft house, 3 storey high with garden and on top on The Peak.........then the answer is no.

That being said, your housing allowance will cover you easy for a nice new flat around 1000sq ft, depending on the loc of course.
Flats range from HK$2m for 700sqft to.........anything up to HK$30,000 per sq ft...........depends where you want to live really

got to remember one thing, its a free flat in HK, one of the most expensive property markets in the world..........and CX is paying for it.

[flyingkiwi]

my suggestion is to look at what the market is doing at the time, i brought after one year in CX, missing out of one years worth of the higher allowance. The total monies i missed out were approx $240000 HKD. However my property went up in value by over a million HKD, imagine how i would have felt if i had waited because of 20K/mth....

[stillalbatross]

Yesterdays SCMP had quite a few of the Merchant banks forecasting drops of around 25% in property values by the end of next year, it's a very cyclical market and totally different to that which the average westerner is use to. It is common here to buy and sell 3 or 4 times in one year while most purchase residential and commercial and sit on it without tenants praying that they will catch the market and flick it as the market peaks. .Basically the locals treat it like another form of gambling, I'm in a house where, of the 4 previous owners, 2 went bankrupt and two doubled their money. Naturally in HKG everyone only talks about the winners in the market. Back in 96-2000 plenty of Dragon and CX bought approx 800 sq/ft apartments (all one could afford) got hit badly by a 50% fall in property values, couldn't move out because rent wouldn't cover the mortgage, couldn't sell because the 2-4 million hit would put them into bankrupcy and automatic loss of job, couldn't leave Hong Kong because money earned elsewhere wouldn't cover the shortfall.

Go back 20 years to the 15% interest rates, people were forced to quit their jobs because the house purchase had given them a mortgage they couldn't sustain.

If you're in it for the long haul then buy within your means and have a go at reading the market, within reason, at the time you want to purchase. It would be nice if it was more like Aust or the Uk (last couple of years aside) and over a 10 year period it showed relatively stable growth, but it isn't. There is still a massive speculator involvement in the market and that pushes the peaks higher and the troughs lower.