Hong Kong Property prices, Flu, etc.

[hongkongfooey]

Have a non PPRUNER friend thinking about getting into the property market, he is being told to hold off as the prices are way over inflated, and due for a substantial correction later this year ( September ) also now we have the distinct possibility of another flu epidemic ( although not if you believe the press )
Would appreciate input from the more ( than me ) financially astute out there ( especially you 404 and Numero Crunchero )

[missingblade]

I have been trying to sum the situation for 8 months - to no avail - while prices climb. As they should cause we have inflation and low intersest rates - which makes no sense - we should have higher rates when inflation is up. But the dollar peg takes care of that.

Then there's the stock market - down 25 % - which normally lead to lower property prices - but not now cause we have low interest rates....

Flu - well I think everybody will try sit this one out - so no bargains there.

Supposed supply shortages which will push prices - whether real or not the newspapers keep saying it and people believe it.

Money from the mainland flooding in.

Its a quagmire of possibilities - Prices might keep going up - but there are issues like affordability and possible higher interest rates in future. On the other hand prices are now where they were TEN years ago - so some consider that fair.

I give up - and nobody knows. Hope that helps.

[hongkongfooey]

thanks for the reply 'Blade :ok:

[volarecantare]

Dear HKf,

here are no certainties out there at the moment with investments and those you ask will split into 2 groups, the ones who think positively and do not live in fear and make the decisions based on clear goals they have set with their families and those who are terrified to comit to anything either because they are overly influenced or because they live in fear all the time.

If you are asking advice from people, take a look at their lives, progress and values, if they match yours then its worth considering but in the end its a lonely decision. Sitting on the fence, is not sitting on the fence, it means you are loosing flushing the value of your housing allowance down the can each month!

If you are worried about investing your savings into the down payment, then go for the maximum morgage you can over the longest term possible. he first year is the hardest psychologically then it gets much easier.

I have always found that when making investment decisions at the end of the day it comes down to having a clear goal in mind. In all the years in HK there was never a right time to buy, only in retrospect did we know the answer and those who took the risks who at the time were considered foolish by some were called lucky afterwaards.

If you are on an ex pat package with a housing allowance, ask yourself how long who hope to stay here, multiply your house purchases allowance by that many months or years and thats how much you can afford the propertity to go down and still break even.

The other factor to consider is that if you have a family, owning your own home gives a certain amount of peace and comfort in an otherwise rather displaced lifestyle.

Fortune tends to favour the brave :ok:

Good luck.

[missingblade]

HONG KONG (XFN-ASIA) - The government expects 10,980 new private apartments to finish construction and be ready for occupation this year, against 10,470 units last year, according to a report issued by the Rating and Valuation Department.
Apartment completions are expected to rise further to 12,670 units next year, the report said.
Completions refer to units that have finished construction and are issued occupancy permits.
About 46 pct of the new units completed in 2008 would be located in New Territories and 40 pct in Kowloon, according to the government report.



So much for the supply shortage......

[Fenwicksgirl]

Missingblade you are missing the point. That amount of flats released this year is 30% below forecast. Therefore as sentiment goes there is a tightening of supply! Once upon a time it was better to rent to get a bigger place and in alot of cases that is still true but at the middle level it is now cheaper to pay off a mortgage than rent for the equivalent flat size.
We are still well below 97 prices so dont panic there either. My agent has said she gets mainlanders coming in and paying for flats sometimes without inspecting and paying the advertised price. So still money coming in, just not from traditional sources, ie bankers with their huge bonuses.
If the market goes up another 20-30% this year, then i will bail!!!!!!!!!

[404 Titan]

Fenwicksgirl
My agent has said she gets mainlanders coming in and paying for flats sometimes without inspecting and paying the advertised price.
And you actually believe your agent? :ugh:Supply is only down because demand is down.

[hongkongfooey]

Not too sure about the short supply rumour, where it stems from and what the motive behind it is ( well ok, I know the motive )
But judging by the mailbox full of leaflets with flats for sale/rent every few days, and looking at the empty units in TC and DB, and looking at the time some places are taking to sell, I question any shortage.
When people line up outside a place ( as in Melbourne, Sydney and Perth ) to rent it and get in a bidding war, that's a shortage, I have not seen this in HK.

[404 Titan]

about_to_jump
So where's the downturn?
When the stock market bottoms out. Where do you think the money for property has been coming from between November and February? When you see money quickly move from one investment to another because the grass appears longer, it usually results in a bubble. In your case a 70% price rise in 10 months but most of it in the last 4 months is a bubble waiting to burst. I suggest you cash out now while it lasts.:ok:

[hongkongfooey]

Well, they're not queuing up in TC and DB, I can tell you that, plenty of vacant properties.

So 404, I assume you are not recommending to buy at this point in time ?

[Kitsune]

A cautionary note.....a flat in DB bought by a friend of mine at the very pinnacle of the last Hong Kong boom has STILL not regained its price in HK$, let alone any reliable home currency. If the company is paying for you to buy your house a la CX, go for it, if it's your own money.............:ooh:

[404 Titan]

hongkongfooey

Some advise I never read in a book but received from my mum many years ago when my parents own numerous investment properties in Aus. You buy when the interest rates reach their high and sell when they reach their low.

With the exception of a major flu outbreak in Hong Kong, my advise is now isn’t the time.

[missingblade]

Carnegie ( I think ) said - " Sell when everybody is buying and buy when everybody is selling "

This ties in nicely with statement above to buy when rates are high and sell when they are low.

Two things puzzle me -
1. Affordability - how many people can pay these prices and service the mortgage when interest rates go up?

2. The statement made by some that because we are still below 97 values - or thereabouts - ten years later - the current prices can be considered good value. HKG is way more expensive than anywhere else on this planet just about.....so what is considered value? What the speculators tell you? Or what the average herd mentality HKGer thinks?
Last bubbles were - '86 , '97 and next one is...? Do the math.

Now the CX money situation - I hate to waste it on rent - but on the other hand I would rather do that and buy when the market is down and make a much quicker return with much less risk of negative equity than buy now and take 15 years to pay it off.
It's all as clear as mud to me...

[404 Titan]

missingblade

You forgot to mention paying more tax to the IRD because of the larger loan and therefore the longer time it will take to pay that loan off.

[4-Daned]

Interest rates will be at an all-time low by September of this year. I can't see how this would do anything but increase the property values, as everyone turns to buying flats, often as cheap or cheaper than renting....This is already a natural correction to the downturn in stocks.

Interest rates at an all-time low? Why would you not buy??

[stillalbatross]

Yes, interest rates are tied to those in the US but while low interest rates may drag the US out of it's quagmire (along with the Feds rescue package) eventually inflation has to be sorted out in the US also. It's somewhat over 3 and a half and it's heading towards 4, with the fed stating that it should remain below 3%. So that would lead one to believe that the interest rate cuts will only last as long as the fed is happy to tackle the sub prime and when it moves back into sorting inflation then the interest rates will go back up as fast as the fed thinks the markets will handle. My completely uneducated guess, based on smoking round the back of the bike sheds when I should haver been in my economics class is that will occur some time mid to late next year. Then Hong Kong would be in a peaking market price wise with sharp interest rate rises coming as well.

There are other ways of fighting inflation but in a round about way interest rate rises are the easiest.

Anyone who thinks that you can't go wrong buying in Hong Kong hasn't witnessed people 10 years ago stuck in negative equity in a house that the family has grown out of, that they can't sell because the valuation is way lower than the mortgage, that they can't rent out because the rent is a drop in the ocean next to the mortgage payments, that they cant leave Hong Kong and walk away from because the bank would push them into bankrupcy in an attempt to get the money still owing on the mortgage, that the resulting termination of their CX job as per the employment contract would make taking a basing slightly difficult. There is always the argument as to what lengths the bank would go to in chasing you down in your own country if you did a runner.

There are risks and downsides to everything, so long as you know what you're getting yourself into.

[404 Titan]

4-Daned
Interest rates at an all-time low? Why would you not buy??
As well as my advice above, rule number two, never buy in a rising market, always in a declining market. You have much more leverage with the vendor and as long as you do it near the bottom of the market you have minimum to loose and the most to gain.:ok:

[777300ER]

and as long as you do it near the bottom of the market you have minimum to loose and the most to gain.

That's a little easier said than done isn't it?? I wish it was as easy as you make it sound...

[404 Titan]

777300ER

I never said or implied it was easy. It’s only because of my background that I'm so keen on economic issues. I tend to look at economics from a macro point of view rather than the micro one that we all seem to see and read about daily in news papers and television. When you put this vast economic jigsaw puzzle together you get a pretty good picture of where things are going.

[4-Daned]

It depends if we are talking about the housing scheme...If it is all out of your own pocket??? Couldn't handle the swings...

However, I have never met anyone that made money on the housing by paying rent...Interesting that "negative equity" is still such a powerful force when you're not paying the mortgage out of your salary per se...

I think it really depends on how long you are committed to staying in Hong Kong. If its for the relatively short term, then I agree you should be very careful where in the cycle you buy!

I have met people that sold their house at less than they paid, and pocketed quite a bit...They never studied macroeconomics, but they made money.

What about buying higher and selling a little higher? What if the company made housing a straight benefit, as salary? Now that's a different story!

[clarence4000]

Direct him/her here worth a look to consider all viewpoints
good luck
http://www.852realestate.com/propertynews/

[hongkongfooey]

Excellent ! Thanks very much to all that have replied :ok:

I have heard of more than one situation Kitsune mentioned too, people that bought at the peak and still can't get close ( 10% short in 1 case ) to what they paid for their property :rolleyes:

[bobrun]

multiply your house purchases allowance by that many months or years and thats how much you can afford the propertity to go down and still break even.
:confused:
What about changing interest rates, down payment, insurance premium, taxes, possible fees for breaking your mortgage early should you do so, management fees, etc? Compare the total cost of buying to what you could do by saving and/or investing that same amount of money. Also keep in mind that the first years you're paying a lot more interest than capital with the monthly allowance. There is a risk in buying, unless you plan on staying till the mortgage is mostly paid off. And the market do seem to be inflated at the moment, renting or buying.

The fixed amount allowance is more than a S/O salary at the moment; calculate how much you will have to put aside for tax etc every month if you buy and you'll see that not much is left until you get on the F/O scale. Just a thought.

[luvmuhud]

hongkongfooey,

I'm certainly no expert, but:

I've never sat next to anyone on the flightdeck who has regretted waiting to buy property in a Hong Kong property trough.

I've sat next to several who have regretted buying in a rapidly rising market.



Although it may appear that having Cathay paying off your property is a one way bet, if your HK$6m property loses 30% of its value, you'll be sucking in the Pearl River fumes for a long time whilst trying to get back into positive equity.


lmh

[missingblade]

If you really feel the itch to buy now I would do the following:

1.Buy a cheap small spot for 2.5 mill - something like a single floor of 700 ft with a bit of garden in a village house in Sai Kung. Yes you going to be cramped - but its do-able.
2.Fix your allowance at the currently quite high 63 000 $ - this will be for two years no matter what happens when the company negotiates/imposes a new housing deal in Sept.
3. After 2 years you have paid of about half - and if the market is down you should still not be in negative equity. If its stable or up - you win.
4. Sell it if the value is there or rent it out if the value is down at that stage.

So in two years you can at the very least end up with something that is rentable and the rental should cover the mortgage payments from that point on. Or you could end up with some cash in the bank!

[missingblade]

ampan - you miss the point.

Its not our own equity - its money cx gives you for free ( well there is tax - but its max 15% or so ):ugh:

We are all trying to figure out how to most effectively use this cash to build some form of nestegg/investment in up and down markets....

[dragon501]

I like the cheap place idea.... Atleast no money goes to waste and when the market DOES come down.... You're ready for the big one (well in an ideal world that is..)

[hongkongfooey]

Once again, all good input, thanks :ok:

You can't really invest the money CX/KA give you for a mortgage ( instead of putting it into a mortgage ), coz if you don't have a mortgage you only get the rent allowance, which is significantly different ( 35k plus ).
So there is some merit to buying a place even if it's value goes down, as long as it doesn't go down a lot of course.
Rent money is always dead money and unless you rent somewhere really cheap ( ie bank the diff between allowance and actual rent ), there is nothing to be gained from renting.

[stillalbatross]

lets not forget here that what you can rent and make your family happy in is considerably better than what you can afford to purchase and pay a mortgage on.

I'd say in the current market it's approaching double i.e. what you can afford to buy for $8mill you would would rent for 30k but since the rental allowance is approaching twice that you can rent a property worth considerably more. Bigger, garden, more rooms etc.

And your family has to be happy living in the place in Hong Kong, no point in telling the wife to put up with 3 screaming kids in the purchased 1000sq/ft apt as you escape to work each day. Plus the tax on mortgage plus govt fees etc is another $8-10k a month you aren't forking out for if you're renting.

If you want a laugh have a look at some of the property cuttings from 1999-2003 where the agents kept saying the falling market had bottomed out and was about to start climbing and the market just kept on in a freefall.

[missingblade]

To say the cost of renting is half the cost of buying is not entirely true. If you calculate it over a 15 year mortgage like most CX guys do then it would be correct.
However over the more usual 20 -30 years that locals use you can now buy for about the same as renting when you look at smaller ( 2-3 mill $ ) places - due to low interest rates.

It is such a speculative market and the chinese all pray to Kwan Kung/ Tsai Shen Yeh ( Mammon for the non Asia hands here ) so they will rather buy than rent at most times.

[bobrun]

You can't really invest the money CX/KA give you for a mortgage ( instead of putting it into a mortgage ), coz if you don't have a mortgage you only get the rent allowance, which is significantly different ( 35k plus ).

True. However you can invest the money that you would have used to pay for the mortgage down payment, the extra tax bill, the management fees, etc if you're renting.

[hongkongfooey]

Albatross!............Albatross !!
Have you got any choc ices ?

Sorry, I digress.

Not entirely familiar with Cx but to rent something in KA at around 50-60K ( in DB: big, garden, rooms or in central: medium no garden etc ) would cost 5-8k from your own pocket. I believe CX S/O max is 29k which limits the range of big, more rooms, garden type properties.

My point, 10m property in DB, circa 45k to rent so 4k from your own pocket.
Apart from the initial outlay, the cost of buying a 10m property with KA is almost nothing ( tax, yes ), then 3k or so a month in management fees etc.
This will be paid off in approx 15 years. Also, KA are paying 37K/month off the principal ( at current interest rates ). If the market does the opposite of what some people are saying and drops 5% from the time you buy, you are breaking even.

Food for thought

[missingblade]

ampan - your ability to miss the point is astounding.

Let me repeat : We all are airline crew and get money for housing and are trying to figure how to best use it. What the vast majority of other people in the city get or do is not the concern of people on a CX forum.

[Hoofharted]

So the current state of the expense arrrangements has absolutely no effect on the market.


Actually I disagree. Word is already out amongst agents, banks and owners that we have received an increase in our HPS and it would appear that this has been construed by some of the local owners as a reason to jack-up the asking price for some of the properties on offer. Nothing happens in isolation or a vacuum in such a small place as Hong Kong.

[Numero Crunchero]

Well I think you have your answer, 20 pilots leads to 20 strong different opinions. I will tell you in 5 or 10 years from now what you should have done!!!

My thoughts.
Dead money is dead money whether it is rent, interest on a mortgage, tax, or opportunity cost of equity tied up in a house.

So some numbers.

Lets say you could do 100% financing, just to keep it simple. I will use 5% as the interest rate, which is above the current rate but also is likely to be below the long term rate since our interest rates are US driven.

$10 million flat/house
Get $60K from CX per month, or $720K per year. Pay $500K($300K in 2008) in interest. Pay approx $40K per year in rates and government rent and another $30-50K in management fees. Pay about $120K in tax.

So overall you are left with a slight surplus of say $20K, in the first year. I have ignored stamp duty and the associated opportunity cost of having that money tied up in the house.

Now buy a $5million place - $250K in interest, tax of $120K, management fees of $15-25K and around $20K in rates and government rent. That leaves you with a surplus of around $300K.


So, if you buy a $10million place(100% financed) you have a highly volatile asset that is being paid off at around $20K pa. Interest rates are low now, but the inflation genie is out in the US and so do not underestimate how high interest rates will have to go to contain it. Also, the US is losing its reserve currency status and will have to increase interest rates, over time, to continue to finance its almost Trillion dollar a year current account deficit.

I bought when the market had been falling for 5 years....it has now been rising for 5 years and I plan on selling soon, FWIW. You can't lose money in property???? Sydney from 1948-1966, Tokyo 1989 till today, Hong Kong 1997 till today....places where and when the median house price was lower at the end of the stated period versus the beginning...and thats just 3 examples off the top of my head. Those are nominal comparisons...if you want to compare REAL purchasing power comparisons, there are many more and longer periods of property underperformance...same is true of the share market!

So, just remember, you can rent for free with no cost and no risk to yourself, or you can buy a $10million asset and ride the property wave and pray that interest rates don't go up more than 2% over the next 15 years. But if it is really important to you to have your 'dead money' to go the bank/government/management company, then by all means deprive a landlord of the same amount of dead money!

If you do feel the need to buy now, buy cheap! Small risk, small gain and SMALL loss.

Everyone is crowing about their property buying prowess now, but they were silent from 1997-2003. Still, as Warren Buffet says, you will only know who has been swimming naked when the tide goes out!

PS 404- your mama wasn't talking about pegged exchange rate economies with externally driven interest rates! ;-)

[Shot Nancy]

not the concern of people on a CX forum

Oh, I am sorry. Please let me peruse your CX only forum. Let me guess, your first jet job?

Get into the market in a measured controlled manner and long term you will be ok. For every vocal "expert" who has made 6mill in the last year there will be someone with a sobering counter perspective.

If you dont want to jump now keep accumulating cash for when you feel the time is right.

[Truckmasters]

If you are too worried or sceptical about the property market. Do something else.
Practise buying now by living to the buying budget. If you buy you will need to fund your extra tax, management fees and rates from your salary cashflow.
Put that amount aside NOW. Then take that money and invest it somewhere else, if you can't think of anything else put it in the bank and increase the size of your deposit.
If you do this,
a. you'll be used to living on the reduced wage that you need to manage if you buy a property.
b. you still get some benefit out of renting as you are banking the difference instead of giving it to HSBC, IRD etc.

The key point that NC has made before, YOU must do something, If you spend all your wage every month and do no investing you will still be tied to this job in 10 years even if you want to leave.

[missingblade]

Shot Nancy -

Apologies for my elitist assumption that this was CX only forum. Won't make that mistake again.

Actually third jet job ( 727/767/747 before CX )..... but I fail to see how that relates .... :p

[jonathon68]

Ask yourself these questions,

1. Will the CX Housing Allowance pay off that mortgage during the time scale you are willing to live in HKG? (With a conservative interest rate factored into your calculations)

2. Can you (and your family) live in that property for the same period.

If so, then why not use the housing allowance to supplement your meagre pay and retirement package. 500k/per year over 15 years is 7.5 million extra income, but that comes with ties to CX/Hong Kong and some risk.

There are various generations of CX pilots who have widely differing perspectives on this.

My generation had to pay 30% cash down for their high-rise appartments, and paid interest rates above prime (typically prime +1% or more). We only got the full rent free zone when actually promoted to JF/O, unlike the current 2 year automatic progression. We went through the property downturn of 98/99 and consequent negative equity era (coupled with job insecurity 1999-2001), and naturally have a conservative persective.

There is now a generation of pilots who bought in 2003/4, who were able to get 90% financing (or more) mortgages (at prime -2.X etc). They were then able to enjoy a couple of significant surges in property values in late 2003 to 2005 and 2007/now. To this generation, use of the housing scheme to make millions, seems like a "no-brainer".

There is nothing new about this situation in HKG for CX/KA pilots. But most of the guys who suffered through high interest rate woes in the 1980's are gone now, so we only have the Pokfulam property millionaires input from the few remaining very senior A scale senior captains. But the lessons remain the same.

For me, it makes sense to be exposed/tied to the property market in HKG, since my asian family and I are likely to remain in asia for good. We consider the CX housing allowance as paying off the mortgage on our current home. This will fund our future home somewhere else (hopefully cheaper) in asia. If our HKG property does well, then we will consequently live well. But conversely if our HKG property does not do well then our living circumstances may suffer.

Note, that I do not consider the housing allowance as likely to generate a profit or any extra income/saving. Simply a place to live, which will be debt-free at 55.

As pilots we are used to planning alternatives etc. So basically, while one should consider "nothing ventured, nothing gained" with regard to using the housing allowance, you should also be prepared to live with a downturn.

Be careful with over 70% financing, since the finance costs increase significantly.

Be very careful about financial commitments while you are facing any upgrade selection process. Any mortgage will typically have a penalty phase of 2 years, so if there is any chance of your circumstances changing within the next two years then do not lock yourself in. This includes SO to JFO, or Command upgrade. Personally I did not buy until I had passed my QL, since there was (in those days) a significant wastage rate.

Just think, if I fail my PK/QL/three bar etc... with this mortgage, then how much pressure will I be under!

Or, with packages so much better everywhere else, why am I stuck here in HKG with this mortgage for the next 15 years!

Good luck!

[rick.shaw]

Tend to agree with you j68. I have both been a renter and home owner. Timing is important, and sometimes a little bit out of your control. However, generally speaking, it is my belief that you can't go wrong in buying. It just depends on your risk management profile and living standards requirements. If you want to go lifestyle, then renting is probably the way to go. Especially if it means keeping the other half happy. Remember it is the wife and kids that have to stay in Hong Kong while we head off and get respite from the pollution, noise, kids and the hot weather.

[404 Titan]

Numero Crunchero
404- your mama wasn't talking about pegged exchange rate economies with externally driven interest rates! ;)
You give my mama too much credit. She just knew the Aus property market inside out and the relationship prices had to interest rates. She wasn’t and still probably isn’t that savvy with the relationship between exchange rates/interest rates and would look at me funny (:confused:) if I asked her the relationship between pegged exchange rate economies with externally driven interest rates, i.e. like HK.:ok:

[Rice Pudding]

I've rented, bought several times, lost money, and made money. Recently I've sold.

I've learnt this:
When you buy a place, if possible, buy the one that you can live in for at least 5 years or more. This ensures you'll be happy there if the market turns down.

Lets say you bought a normal apartment that you can be comfortable in for a while......

In most societies, for a normal, modest home, if the mortgage on that place takes more than 25 years to pay off at current rates, then it's expensive, and tends towards the upper end of a housing boom. If you're looking at a 30 year mortgage on a normal sized place.....well then make sure you're comfortable in it for 30 years, it's very expensive.

If the mortgage on the same place can be paid off in under 10 years, then buy it. It's cheap, and this happens at the tail end of a bust or recession.

Sooner or later prices will correct, up or down, wages and salaries will play catch up, and the mortgage term will tend back towards about 15 years. But it rarely seems to stay there for long.

Right now, to buy a 3 bedroom apartment in HK suitable for a family, you could expect a mortgage term of around 25 years. This is with low interest rates, and a high housing allowance.

So, it's very possible to see much higher property prices, but for my money it all comes down to risk management, and how well you can sleep at night if prices fall by 10 - 20%.

[claire40]

Take the survey and find out
http://852realestate.com/cathay/csurv2.cfm
:cool:

[bored]

1. Mass market prices still shy of 97 prices, mid luxury end just getting there now......property markets usually double every 7-10 years.

2.We crossed into negative interest rate territory around January ie, interest rates lower than inflation........the last time this happened was 1990 and over the next five years prices tripled. This did lead to 97 bubble however! Check HK gov website for stats.

3. Stock markets a bit wobbly...... generally cash flows into property after/during stock uncertainty(look at property rises between Nov-Feb!)

Do the numbers, its cheaper to buy and service a mortgage at the moment than it is to rent so one of two things should happen. 30% rise from here a cakewalk!!

[stillalbatross]

Do the numbers, its cheaper to buy and service a mortgage at the moment than it is to rent so one of two things should happen. 30% rise from here a cakewalk!!

Really? The 59K I have for renting the 2000sq/ft $15 million property costs me nothing in deposit, virtually nothing in tax, nothing in management fees and nothing in wear and tear.

Please tell how I can do the numbers and purchase such a place and live comfortably in it. Me thinks plenty on here are living in shoeboxes in order to make money and their families are sacrificing quite a lot as a result.

Would also like to lock in my current interest rate for the next 10 years.

[hongkongfooey]

Help me out here ( 404 ) but I didn't think renting was tax free :confused:
Isn't there something about the amount the company pays for your rent being tax free but then you pay 10% on top of your annual income ?
IE: rent 50k/month = tax free
income for year = 850,000 x 10% = 85,000 extra tax.

I am only asking as this is what I was told.
so don't shoot the messenger :=

[Numero Crunchero]

hongkong fooey,
your income is increased by 10% and then you pay tax on that increased amount. So if the tax rate was 15%, you effectively pay 16.5% (15% +10%*15%).

If you actually pay rent out of your pocket then that reduces your taxable income by up to 10%, once it has been increased by 10%!!!!!!

If you earn $75K and rent under the RFZ say $58K, you will have your taxable salary increased by 10% to say $82.5K (ignoring 13th month, education etc). Housing rental allowance is not taxed but you then have your salary increased by 10% to reflect the housing assistance(renting only). As a purchaser you pay tax on the entire amount of housing/mortgage assistance(some deduction for first $100K in interest I think?)

If you earn $100K and rent a place for say $80K(obviously a captain) then you will have your income increased by $10K (10%) but then reduced by the amount you pay which would be 8% of $80K which is $6.4K. So your taxable income is $100K + $3.6K($10K - $6.4K) = $103.6K

For those that aren't aware once you go over the RFZ(8years in CX) you pay 8% of the total amount of assistance if you choose to rent above RFZ up to your applicable ceiling.

clear as mud?

[hongkongfooey]

Thanks NC, actually I think mud is clearer :}

[Numero Crunchero]

hmmm, re read my post and even I am confused.

Simple rules.

If you rent above or below RFZ just put aside 16.5% of your actual salary/13th month/edn allowances and you will cover your tax liability.

If you are a purchaser, then assume you need to put away 15% of your salary/13th month/edn allowance AND housing assistance and your tax liability will be covered.

Clearer than slightly muddied water?