advice on buying properties in HK

[LeChatNoir]

Hello,

I figure since we are newbies... we can use all the help we can get...

We have talked to a real estate agent - and this is what he told us...

1.) we as buyers will have to pay 1% commission that is "seldom negotiable".

2.) as rental properties, we are better off buying a few lower priced properties vs. 1 luxury flat - we'd get better return that way.

3.) we found that real estate agents are very enthusiastic in pushing the brand new flats, ie. Shining Heights, Lattitude... he seems a little reluctant to find us older flats (we thought we could get more bang for the buck in older apartments)

4.) We actually looked at Shining Heights - we spoke with a person from Henderson and he told us he can get us more discounts if we deal with Henderson directly vs. going through an outside agent. ie. he can waive management fees for 12 months - where as this offer is not open to outside agents.

5.) If we can, we should buy a parking spot along with a rental flat.

5.) Flipping properties like Lattitude can be a good investment since we only need to pay 20%.

Any thoughts? We'd appreciate any guidance we can get... HK real estate is a totally new beast...

Thanks!
-M.

[shri]

>> 1.) we as buyers will have to pay 1% commission that is "seldom negotiable".

Negotiable in all cases. Tell the agent you've found another agent that is negotiable and walk away.

>> pushing the brand new flats

Better kickbacks from the developer. Like you said in 4 ... talk to the developer directly.

>> buy a parking spot along with a rental flat

Depending on where you live, you might be able to rent it out to someone in your building / estate.

[UK/HKboy]

2. That is probably true. there are more mid-range renters that high-end renters so i guess the demand and the return would be higher. Also, do not expect that it would be rented out all the time. if you only have 1 flat, then it is all or nothing. if you have 2 or 3 flats, then you will propbably have rent income for at least 1 of them.

why not buy 1 smaller property now and test the rent waters a bit before diving in with more properties?

3. He probably recommended the newer flats to you as you are newbies... new flats tend to need less work and have less problems to be ready for renting out.

although newer flats tend to be smaller, they demand higher rents, just as the price to buy is higher than older flats. And it also depends on the market you wish to rent out to. i find that the young professionals prefer a modern flat with clubhouse, gym, etc etc. whereas the old, local families are fine with the lower-priced older flats.

but also, if you buy a brand spanking new flat, wouldnt you want to live there before some renters come in and dirty it up after a couple of years?

[hello_there]

5.) Flipping properties like Lattitude can be a good investment since we only need to pay 20%.

Any thoughts? We'd appreciate any guidance we can get... HK real estate is a totally new beast...

I know a couple people who bought in Bel Air (nothing spectacular, just nice two bedroom places w/ parking) to either rent or flip. They are having trouble doing either at the moment...

If you are buying to hold and rent, look at historical occupancy rates for the building. If it is a new development, look at how quickly the flats are being sold and occupied AND how many phases/ additional units will be built, particularly if the project will be developed over a number of years. If new flats are coming onto the market in the same area for a similar price it makes it harder to rent and/ or re-sell at an increase. However, there are some good deals around at present.
Also, HK property tends to hold its value pretty well, but there don't seem to be the big price increases historically. There are some exceptions (including the period from 07-mid-08), but overall prices seem to remain pretty flat.

[Boris]

1) Its always negotiable. Especially in this market and we have seen agents halving commissions.

2) It is all dependent upon worth against rental return. In this market there is no appreciation factor as the market is flat to downward. Choose the price well in the most efficient areas. You should expect approx 7% return year on year. FYI - we achieved 20% in Shenzhen because of an upward market and vibrant buyer interest in a high profile location. We are now cashed out and investing in the HK market in the New Territories which we feel has the best returns and we have a deep knowledge with good contacts of that area.

3) Mind your own business. Do not let others mind it for you. Old buildings are gold mines in certain areas. Just look around Quarry Bay in the areas of Tiakoo Place. Its getting very popular in the lowrise areas with modernised interiors. All that glitters is not gold and shiny high rises glitter a lot to the inexperienced buyer.

4) Always go to the source !!

5) Maybe - if in Central - yes - if in Chi Wan - no.( a HK Island analogy )

6) If you think that you will surely be burned. Flipping in a bouyant market is 50 / 50 on risk. Now is 90 / 10 against. the market is flat and those people that do it have strong connections and invariably set up the deals in advance. FYI - you know the developer and you buy his allocation (say for 100 mil ) you then become the selling agent and flip them to retail buyers at 20% +. Its a fact of life here and many brand name agencies do it.
Trying it retail to retail in this market is suicide.


Enjoy the game !