Property Prices Do Agents Speak The Truth ?
 

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

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:

: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.

buy now or later
 

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

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!

?
 

The strangest thing about property-addicts is their satisfaction about "the rent covering the mortgage". So they congratulate themselves for making nothing. Worse still, they ignore the interest that they would have made on their own equity. So they end up congratulating themselves for losing money.

A more sensible exercise for these people would be to pull all their money out of the bank and stick it on the nose of the favourite in Race 4 at Happy Valley.

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....

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..)

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.

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.

A No-Brainer
 

As soon as it gets anywhere close to the cost of renting being half the cost of buying, the buying market drops - and why the f*ck shouldn't it?

Rent, and shove that extra in the bank.

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.

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.

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

?????
 

The vast majority of the population in whatever city you're in is not airline flightcrew. So the current state of the expense arrrangements has absolutely no effect on the market.

Isn't this stuff nothing more than 4th form economics?

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.

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.

HKF
 

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! ;-)

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.

Alternative
 

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.