We should all remember that it is the 100th anniversary of the Titanic. They said it was practically unsinkable. They had nice charts too. Go figure!
We should all remember that it is the 100th anniversary of the Titanic. They said it was practically unsinkable. They had nice charts too. Go figure!
That said, I wont be wasting my money on buying property in HK any time soon.....
...except that yields on HK property are around 3.5% (this is supported by Government data), and that if you have a mortgage, your yield on the money actually invested minus cost of borrowing is around 5-6% (higher if you can find a bargain priced property and add value doing some basic rennovations that help add to the rental yield).Original Post Deleted
And you are forgetting to factor in the "loss" that you incur each month when you are renting, the avoidance of which, when you are an owner, is also a benefit you need to bear in mind. (Basically, each month you rent, rather than own, you are paying an extra "cost" - basically this is a payment you are making for the avoidance of the risk that you may have bought an asset that will decline in value).
And all of the above also does not factor in any possible gains you make on the capital appreciation of the property you have bought - a factor which has contributed to the wealth of many people living in Hong Kong, based on a trend of property prices tending to rise over time (a trend which is supported by over 100 years history in HK).
So if my property doubles overnight, what do I do? Take my money and move out on the street. If property goes up, it does all over Hong Kong. It is hard to realize the profits unless you leave HK or if its a second home.
Here is what you do:
If property rises to the point where it is significantly more expensive to own then it is to rent, then you sell. (1997 was a perfect example).
If property falls to the point where it is significantly more expensive to rent then it is to buy, then you buy. (2004 was a perfect example).
Of course things will not always be as clear cut as this, and often we will be at stages in between these two extremes - but the amazing thing is that at time when it is clear cut, many people will simply just not see what in hindsight was extremely obvious.
In my opinion, renting is a waste of money. Buying is locking up alot of your money, but you will get it back in the future when you sell (with a profit or loss based on whether you can sell for higher or lower than your purchase price).
I am now 'wasting' $3500 per month interest (H+0.7% on a $6m loan) on a flat that I would otherwise have to 'waste' $25k-$30k on rent.
I am very very happy to have bought and not waste money on rent.
I'm buying a cardboard box, much cheaper. I based this on seeing all those old women collecting them, older is wiser so they must know what they are up to, clearly there is going to be a surge in cardboard box prices so now is the time to get in. You heard it here first.
If you are interested in getting more financial advice then contact: nutjobs are us, a pavement somewhere in central.
Since the dawn of Economics one rule remained true....."What goes up, must inevitably come down." It held regardless of asset class, political or geographical bias. The only way to distort this data is by narrowly bounding it by an arbitrary time scale as Randy has in his original post. No market, no matter how resource constrained, is immune from fluctuation and occasional collapse. However, every time there tends to be "stickiness" of the trend one way or another we tend to get clairvoyant visionaries (perhaps genetically linked to Nostradamus) who claim to know the future behavior of a particular market.
Funny thing about taking a position in the market....You're only right until you're not! I'm not going to dive into the pros / cons of buying (if you can afford a down payment that is..) vs. renting but it does bother me when people are arrogantly boasting about their investment genius when in reality they have nothing but dumb luck on their side.
I've seen this happen many times and across many asset classes (Property, Commodities, Currency, Interst Rates). For example, "Investors" in the US acquiring property in the late 90's early 2000's with product such as ARMs and IOs (Interest Only Mortgages)...as real estate prices could only go higher...right? While in hindsight the Global Credit Crisis seemed inevitable, the fall of Bear and Lehman had the equivalent effect on the markets as getting a left-right combo sucker punch from Mike Tyson at a cocktail party.
Sure Hong Kong has scarcity of land and high demand...as of now. However, all it takes is one sudden shock to the system and the world goes crumbling down (Pandemic, Natural Disaster, War, etc). And long term, you don’t have to be psychic or a genius to extrapolate the Economical migration….once China’s markets develop and mature Hong Kong’s relevance will decline. With economic decline comes migration of labor….I’ll let you fill in the gaps.
the biggest unknown in this whole property equation is the interest rate.. as of now, when US can still control its own interest rate, HK rates are going to stay at this level and property prices will remaining high...
wait till we see US rates in teens and we will know what a correction is