Last updated November 5th, 2018.

 

There’s a high entry point anyone buying Hong Kong property. Nonetheless, the city’s location, stability, and economic vibrancy make it worth looking at for certain types of investors.

 

Formally a British colony until 1997, the city-state of Hong Kong has served as an important gateway between East and West for more than a hundred years. The island became prosperous from trade, which helped it become prosperous in finance later on.

 

Low taxes, business-friendly policies, and a strategic location have helped turned the city into one of the world’s richest. Hong Kong is now the de-facto financial center of Asia – and one of the top three worldwide, rivaled only by New York and London.

 

The Hong Kong property market is perhaps most famous for being the most expensive in the world. At a whopping US$25,000 per square meter (about US$2,400 per square foot), you can hardly buy a 2-bedroom condo for less than US$2 million dollars.

 

Many people live in tiny apartments. These are sometimes under 20sqm, or 220 square feet, in size. Even if you’re making a decent salary, it’s hard to afford much space in a city where even parking spots have sold for over half a million dollars.

 

Hong Kong Skyline

Hong Kong is one of the densest cities in the world. However, quality of life can still be very high depending on where you live.

 

Land reclamation, infrastructure projects, and smart planning have helped keep prices lower in some areas. For example, Disneyland and Hong Kong’s airport are both built on reclaimed land.

 

Having one of the world’s best public transportation systems has also made life easier. The Hong Kong metro is fast, clean, timely, and comprehensive. It’s truly one of the world’s best.

 

But high real estate values doesn’t necessarily mean the Hong Kong property market is a bad investment. Buying assets here is a great way to preserve wealth if you’re a certain type of investor.

 

Quite simply, people from all over the world want to live and work in Hong Kong. Chinese from the nearby mainland come to Hong Kong for freedom and opportunity. Expats foreigners arrive on plush salaries to climb the corporate ladder and gain international experience.

 

Combine that with being a small island territory, add a population of over 8 million people, and real estate is bound to naturally be expensive.

 

As such, buying Hong Kong property is best for certain types of investors – high net worth individuals in particular.

 

The city won’t grow as quickly as Cambodia for example. But for those with a lot of spare cash, there’s something to be said about buying real estate in a global financial center with limited space.

 

Can Foreigners Invest in Hong Kong Real Estate?

Technically, there is no freehold land in Hong Kong – all plots are leasehold. Yet it’s far more complicated than that in practice.

 

When the British gave control of Hong Kong back to China in 1997 it was done so under the condition that all land would be on a lease for 50 years. Therefore, all land is leased from the Chinese government until the year 2047 by law.

 

However, few people expect much of anything to happen in 30 years. The general consensus is that all leases will be renewed, probably free of charge, once 2047 arrives. Taking people’s land would ruin everything which made Hong Kong successful and achieve nothing.

 

The Chinese are a very practical bunch. That’s why they’ve kept Hong Kong as a separate system from the mainland in the first place. Why ruin something that clearly works?

 

Of course, all of this means that foreigners have the same ownership rights as locals when buying Hong Kong property. Just remember that you’re technically on a long-term lease.

 

How Much are Property Taxes in Hong Kong?

Hong Kong property taxes are payable when either renting or transferring your asset. These taxes are rather high compared with other housing markets in Asia too.

 

Every type of real estate here is bought and sold on a leasehold basis. So you don’t have to pay annual tax on Hong Kong property if you’re not making any income from it.

 

On the other hand, a tax of 15% on the property’s rental income is payable if you’re renting it out. There’s also a 20% deduction for repairs and maintenance, but this is just assumed to be 20% of the rental income. The effective tax paid on rental income is around 12%.

 

You also have to pay stamp duty if you’re transferring real estate in Hong Kong – or I suppose it’s rather the rights to a lease.

 

Property tax rates in Hong Kong vary widely based on whether you’re a foreigner or permanent resident, whether you own other real estate in Hong Kong, the value of the property, and the amount of time you’ve owned it.

 

In summary, stamp duty in Hong Kong can be as low as 1.5% of its total value or as high as 32% depending on the asset’s value.

 

Best Places to Buy Hong Kong Property

Hong Kong is rather large for a city-state. In fact, it’s almost 4 times larger than Singapore.

 

There’s really no such thing as a “cheap area” of Hong Kong. But there are still a wide range of neighborhoods each with their own pros and cons.

 

Ease of access to mass transit system (MTR) is important when buying Hong Kong property for investment. The city is large and congested, so the ability to get places conveniently is important for most people.

 

Thankfully, Hong Kong has one of the world’s best transportation systems.

 

For obvious reasons, real estate prices become lower the further you get away from central Hong Kong’s business district. Houses located on Victoria Peak, along with apartments in Central, are among the most expensive properties in the entire world.

 

Meanwhile, apartments further away on Lantau Island or the far outskirts of Kowloon have more reasonable prices. They’re not cheap – just cheaper.

 

Wan Chai / Central / Mid Levels

Central and Wan Chai comprise Hong Kong island’s main commercial and financial centers. Nearby Mid Levels is located on the lower part of Victoria Peak with easy access to both districts by escalator.

 

It may still be worth buying real estate in these areas if you have tons of spare cash and want to preserve your wealth. There’s a rare kind of preservation that comes along with having billionaires and large banks as your neighbors in Asia’s financial center.

 

Just remember that you’ll pay lots of money when buying a condo unit next to HSBC and Morgan Stanley in Hong Kong.

 

Recently, an apartment in Mid Levels broke records by selling for $142,000 per square meter – or $13,200 per square foot. The property wasn’t large by billionaire standards at 531 square meters (5720 square feet) but was nonetheless sold for many millions of dollars.

 

Wan Chai is a bit more entrepreneurial and focused on small businesses than Central. Property here is a bit cheaper than in most of northern Hong Kong island yet still among the region’s most expensive.

 

Skip the Next Western Recession

Learn the best places to invest – and where to avoid – by downloading our free Investment Cheat Sheet.

Mid-Levels Escalator

One of the several escalators leading from Central to Mid Levels.

 

North Point

North Point is a more local neighborhood directly east of Wan Chai. The MTR runs through the area, so expats often choose to live here because of simple access to the offices, international restaurants, and malls found closer to downtown.

 

But few of these amenities are in North Point itself. Instead, there’s a traditional vibe with wet markets and some great Cantonese food.

 

Foreigners living or buying property in North Point would probably tell you they prefer the authenticity. There’s plenty of buzz and vibrancy here.

 

Real estate prices are also noticeably lower than in nearby districts. Some might call North Point “run down” – and that’s probably true when comparing it to the glitz of Central.

 

With that said, apartment buildings are in good condition and the area is seeing greater interest from expats. North Point’s combination of centrality and value is hard to find elsewhere in Hong Kong.

 

Jardine’s Lookout / Happy Valley

Two of Hong Kong’s priciest areas, Jardine’s Lookout and Happy Valley are both located on Victoria Peak itself.

 

Some of the best views on the whole island can be found in these neighborhoods where properties have coveted views of the city skyline and Victoria Harbor.

 

Offering seclusion and convenience, Happy Valley has a variety of different properties. You’ll find apartments in low-rise complexes and high-rise skyscrapers alike.

 

Jardine’s Lookout is more exclusive by comparison – not that Happy Valley isn’t exclusive too. But Jardine’s Lookout boasts many large homes worth millions upon millions of dollars.

 

Needless to say, spectacular views combined with easy access to downtown make these two among the best places to live in Hong Kong as a foreigner

 

Repulse Bay / Stanley

Located on the southern part of Hong Kong Island, Stanley and Repulse Bay have some of the territory’s nicest beaches.

 

Hong Kong’s locals and expats alike buy property in these neighborhoods because of their world-class restaurants, international schools, and of course spectacular ocean views.

 

One drawback of living in Repulse Bay and Stanley is not having easy access to the MTR – nor a convenient way of getting downtown. But a metro line is now under construction which should increase these area’s desirability even further.

 

Repulse Bay is known for being more expensive than Stanley. Wealthy Chinese businessmen buy summer homes near their yachts in the former, while the latter has a trendy vibe and is geared toward western foreigners.

 

Repulse Bay Property

Views of Repulse Bay. Don’t worry too much about the name – the breathtaking ocean views are just fine.

 

Kowloon

Across the harbor from Hong Kong Island, Kowloon is somewhat grittier and further from the banks and neighborhoods where most expats work.

 

Yet the peninsula still enjoys great access to Central. In some cases, living in Kowloon will put you just a single MTR station away from downtown.

 

Real estate prices in the southernmost part of Kowloon, closer to Victoria Harbor, can sometimes rival property values in Central or Wan Chai.

 

However, Kowloon is a large area as well. It’s actually bigger than Hong Kong Island itself by most definitions – certainly if you include all the reclaimed land.

 

Property values are comparatively reasonable in Kowloon Tong, New Kowloon further north, along with parts that border Hong Kong’s New Territories.

 

Because of its lower density and several international schools, these parts of Kowloon are preferred by families and those with children. Residents enjoys amenities, shopping, and simple access to the city center through the MTR system.

 

Hiring Real Estate Agents in Hong Kong

Unlike most places in Southeast Asia, where locals prefer to sell property based off referrals from family and friends to avoid paying a commission, real estate agents are commonly used in Hong Kong.

 

Part of this is because the island has high quality services in general. But the biggest reason is because of spectacularly high real estate values in Hong Kong.

 

That means agents can still make a living off of comparatively low commissions.

 

The standard commission is 2% with half paid by the buyer and the rest by the seller. In addition, the buyer must usually pay a deposit of 5% when signing the Sales and Purchase Agreement. The deposit is kept if the buyer backs out of the contract.

 

Is Buying Hong Kong Property a Good Investment?

My answer to “is something a good investment?” is always relative to other investments. Don’t get me wrong: property in Hong Kong could very well increase in price over time.

 

Limited space, a strategic location, and being East Asia’s financial capital mean that property in Hong Kong will always have its buyers.

 

However, many of those same benefits can be found elsewhere. Singapore real estate is desirable for the same reasons, for example.

 

Property values are also significantly cheaper in Singapore even though it’s one of the world’s most expensive cities too.

 

Buying Hong Kong property might be a good idea if you have lots of spare cash and want to park some of it in a safe jurisdiction. But investing in frontier markets offers a better combination of risk and return for most investors.

 

Skip the Next Western Recession

Learn the best places to invest – and where to avoid – by downloading our free Investment Cheat Sheet.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

You Might Also Like


Share This