Hong Kong Property prices, Flu, etc.
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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 ....
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 ....
Join Date: Nov 2007
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To buy or not to buy.. that is that question.
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!
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!
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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.
Numero Crunchero
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 (
) if I asked her the relationship between pegged exchange rate economies with externally driven interest rates, i.e. like HK.
404- your mama wasn't talking about pegged exchange rate economies with externally driven interest rates! 
) if I asked her the relationship between pegged exchange rate economies with externally driven interest rates, i.e. like HK.
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[throat-clearing sounds] - Why bother with any of this? Most Cathay pilots are Ockers, intent on retiring to their lifestyle block in the Victorian foothills, to grow grapes, and exercise the dogs - and grow quietly senile with as little offence to the neighbours as is possible.
So why take a punt on the HK property market? You don't give a flying f*ck about HK, do you, really?
So why take a punt on the HK property market? You don't give a flying f*ck about HK, do you, really?
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My 2 cents
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%.
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%.
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Is it true Cathay Pilots have a financial IQ of Zero?
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buy
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!!
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!!
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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!!
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.
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Exactly: When doing the numbers, you have to compare apples with apples. You can't compare an apple with a shrivelled-up raisin.
Another thing that is often forgotten when doing the numbers is the interest that would be earned on one's own equity in the property, if one didn't own it and was able to put it into an interest-bearing account.
As for CX's expenses regime, is that locked in? Or is it something that CX can adjust annually? If the latter, then why place any reliance on it?
Another thing that is often forgotten when doing the numbers is the interest that would be earned on one's own equity in the property, if one didn't own it and was able to put it into an interest-bearing account.
As for CX's expenses regime, is that locked in? Or is it something that CX can adjust annually? If the latter, then why place any reliance on it?
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Help me out here ( 404 ) but I didn't think renting was tax free
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
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
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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?
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?
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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?
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?
