Less than 5%
5.1 to 10%
10.1 to 15%
15.1 to 20%
20.1 to 25%
25.1 to 30%
More than 30%
>> I thought that HK is already part of China?
HK is already part of China, but there's a policy called "One Country, Two Systems", which is defined as how it is named.
You may want to ask questions about that..
I know about the two countries (HK and China) and one system (capitalism) system, but someone last time wrote something along the ine that in 2047, when 'HK will return to China, China might abolish all the land leases and take back all the land". So I am surprised that all of HK hasn't returned to China in 1997? Is there are '50 years period' after which further changes are to be expected? And what shall we expect to see in 2047 (if, indeed, we are still alive?)?
I'd heard the *only* piece of freehold land in HK was St John's Cathedral in Central, everything else was leased by the Gov.
Which strikes me as a crazy system - in the UK if you own the freehold of the property you automatically own the land the property stands on.
In 2047 I can't see the Chinese gov could do anything other than carry on the current system: they can't take the land back; they could ask everyone to buy their land outright, but who would have the money to do that?; they couldn't just give the land to the current tenants (as they'd lose a valuable source of income) - so I guess they'll just keep it as it is. Though all this has made me think twice about buying something here. Very thought provoking.
Please allow me to share my understanding and experience on some of the issues discussed. China is a communist society in a capitalism style -- developers are selling properties (but usually 70 years) at increasingly higher prices and there are stocks exchanges in all major cities etc. There should be no worry about how the government handles the lease matters in HK 41 years later. Likewise, nobody is sure how Singapore govt. will handle a 99 lease on its expiry.
On Hong Kong island, most leases are 999 years and they go beyond 1997 on return of HK to China. Elsewhere, most leases expired in 1997 but were automatically extended for 50 years to 2047. There is no much difference in property prices on that factor alone, even though govt. rent is currently payable on the renewed leases.
Banks are generally far more concerned with repaying capability of borrowers than lease tenure, which was once a lending criteria before 1997. Banks also evaluate property values on their age, location, surroundings, maintenance etc.
As to future value, properties are just like other assets, with prices largely governed by supply and demand. Buyers tend to prefer newer projects, with good environment and facilities, and then demand is higher and so are prices. Other buyers stress on location and convenience, and so even 19 year old estates like Tai Koo Shing are still expensive.
Property prices in Asia fluctuated over the last 20 years mainly due to political / financial reasons (financial crisis, emigration, SARS etc.) in addition to economic factors, viz. growth or depression. But foreign exchange was also a consideration. Compare a property in Malaysia and one in London can clearly show that the former investment was a failure due to 30% devaluation of the RM whilst the latter was a success on progressive growth in both capital value and currency.
On HK property market, the worst should be over but how fast and much more it will go up is a question. Currently, global economies, incl. China especially, are doing well, and HK will benefit. HKD is pegged to USD which has an increasing tendency to decline. On both counts, inflation seems to be inevitable to persist, in which case, the attraction of property investment is significant as against other investments like fixed deposits which earn you a fixed nominal return. But an investor's gain can hardly materialize unless holding on more than one unit, one for own stay and another for rental income. The logic is that any gain on one's self-occupied flat is virtually on paper only, even though he/she may switch to a smaller or larger unit to suit one's needs, just as the common practice of HDB owners in Singapore, who can change to a smaller flat to reap some profits upon retirement. On renting out a unit, the tenant contributes partly to the monthly mortgage payment, but the initial contribution is small, but over time, with inflation and/or capital appreciation, it is fair to increase rent correspondingly while the ratio of bank interest in the mortgaged sum continues to diminish on regular repayment, and this results in increasingly higher contribution to interest expenses. A more common way to evaluate rental income is on net rental yield, i.e. on net income against investment cost, currently only around 3% on average, which is not so attractive, but the prospect is on capital growth. Anyway, property investment can be treated as forced savings, an ideal self-run retirement plan on realization.
A nicer 2-bedroom flat (710 sq.ft + balcony, sea-view, high floor) in Park Island was at about HK$2.7 million at beginning of the year, more or less the same currently (?). Rental yield is not that attractive for the landlord, for the time being at least, especially after deducting govt. rates & rent, mgt fee, property tax and above all depreciation on furniture / appliances.
For expatriates in HK, it is more advisable for them to rent rather than to buy, when rentals are very reasonable. It could be difficult to sell a property when foreigners leave HK. It is more convenient to rent, esp. a furnished flat to save all trouble to discard used items on departure. As an alternative to invest in properties is to invest in property stocks, which theoretically grow (or decline) wtih property values, or even set up private investment companies jointly with locals or other expatriates. HK basically still follows British legal systems and there is no restriction on funds transfer. There are lots of opportunities in HK.
just 1 simple question, is there a difference in how banks give loan to property purchase ?
i.e. what is the highest percentage of loan to be given to a new property/old property.
what is the longest tenor loan to be given to a new property/old property.
There is a norm for banks in HK to grant loans upto 70% of the purchase price at the banks' valuation, which may be higher or lower than the transaction price. However, banks and developers sometime team up to offer second mortgage on an additional 10-20% for new property projects to promote sales. Banks tend to give a lower valuation on older buildings, esp. single blocks or those not so well-managed. They tend to lend for maximum 20 - 25 years. The longer the loan period, the higher is their risk, as repayment of the principal amount becomes relatively small for a longer term.
Banks assess borrowers' repaying ability and prefer stable income to lend on a larger quantum and they decline to extend the loan to borrowers beyond 70 years old.
Lending policies vary among banks, but they try to follow each other due to competition, depending also on internal liquidity and quota (as some people say)
Freeier : not looked lately, but when we were looking for a place five years ago, the offers were upto 95% financing ( 70 from the bank at cheap rates + 25% at higher rates through the developer and their designated bank) for brand new properties -- which were of no interest to us.
Old properties -- banks seem to be sticking to 70% and are fussing about a fair bit of stuff when you apply, but eventually they approve the loan.
hangover ? that's a 2 mths late reply to a post. 8-)
anyway my argument is this, why would banks have such a big differentiation between new and old property if there isn't a lease period issue in HK.
in Singapore, a property with less than 60 years lease on paper would very likely not get you any loan. The computation might be sensible, albeit conservative.
Banks in HK are hiding these facts behind the rosy picture developers paint. and hkers are unfortunately too overwhelmed by the property make money craze to do a full due diligent.
Last edited by freeier; 02-02-2007 at 09:13 AM.