HK is the 13th most Pricey City

HONG KONG is the 13th most Pricey City (Economist Intelligence Unit)



# 01 / ( 06- 135) : Singapore

# 02 / ( 08- 128) : Paris

# 03 / ( 04- 136) : Oslo

# 04 / ( 07- 131) : Zurich

# 05 / ( 03- 137) : Sydney

# 06 / ( 01- 152) : Tokyo

# 06 / ( 04- 136) : Melbourne

# 06 / ( 10- 124) : Geneva

# 06 / ( 09- 126) : Caracas

# 10 / ( ?? - ???) : Copenhagen

===========

# 11 / ( 12) : Hong Kong

# 14 / ( 15) : Osaka

# 15 / ( 21) : Seoul

# 17 / ( 19) : Auckland

# 21 / ( 30) : Shanghai

# 39 / ( 40) : Shenzhen

===========

# 26 / (???) : New York City



There's a widening gap between Singapore and Hong Kong, which may make HK a more attractive place for businesses to relocate.



Meantime, cost are rising in mainland China, where the impact of a stronger renminbi has been felt.


*( The WCOL survey examines prices of 160 products and services in 140 cities... aimed at helping companies calculate allowances for executives being sent overseas.)

New businesses coming here, may want to choose one of the newer CBD's outside Central

===

(1)

HK Offices Price at Twice Manhattan

http://www.bloomberg.com/news/2014-03-05/hong-kong-s-nose-bleed-skyscraper-office-values-beat-manhattan.html


(2)

Is that Central (a small place) versus Manhattan (a big place)?

I wonder how ICC (in Kowloon) compares with the tallest modern building in the Wall Street area?


(3)

Workspace at “nose bleed” level in skyscrapers, which commands the highest rent, is selling for $69,222 a square meter (10.8 square feet) in Hong Kong compared with $42,283 in second-ranked Tokyo and $25,740 in Manhattan, the London-based broker said in a report today. Five of the 10 most expensive cities are in the Asia-Pacific region, according to the report.


/ above are posts from the Main Property thread /

WHO CAN AFFORD to live in HK ?


Today's SCMP says that Bill Gates is now the world's richest man

(I might put my money on a Rockefeller, a Bush, or a Rothschild, if the "offshore" assets could be counted)


With a reported NW of US$ 76 Billion, he can afford HK, and so can #2 Carlos Slim at $72 Billion.


Obviously, HK's rich can too:

==

#20 : Li Ka-shing -- : $31.0 Billion

#22 : Lui Che-woo- : $21.0 Billion

#35 : Lee Shau-kee : $19.6 billion


So can, the mainland's richest

==

#64 : Wang Jianli ------ : $ 15.1 billion

#80 : Pony Ma Huateng : $ ??

#91 : Robin Li Yanhong : $ 12.1 billion


And now, even some younger people can, such as:


24 year old: Perenna Kei Hoi-ting (Ji Reili),

the world's youngest billionaire

Singapore has topped Tokyo to become the world's most expensive city, according to a cost of living survey from the Economist Intelligence Unit (EIU).


In its 2014 Worldwide Cost of Living Survey, the EIU said the world's ten most expensive cities to live in are: Singapore, Paris, Oslo, Zurich, Sydney, Caracas, Geneva, Melbourne, Tokyo and Copenhagen, respectively.


(Read more: Singapore to tax sin instead of the wealthy)*


Singapore, which was the world's 18th most expensive city ten years ago, has steadily crept up the rankings on the back of a strong currency, the high cost of owning a car and soaring utility bills.

==

> http://www.cnbc.com/id/101462586


*- the government is introducing higher duties on betting, tobacco and liquor.


Tobacco taxes will rise by 10 percent, liquor taxes will rise by 25 percent across the board and the betting duty rates will rise to 25-30 percent of gross bets at Singapore Pools, effective immediately.

As usual, the situation is very different if you are one of the 50% of households in HK living in public housing. For them, I think HK is one of the cheapest cities around (though of course their salaries are very low).


Plus, do they calculate the cost of housing using $/sq. ft., or $ per flat?


As usual, these stats don't make much sense, but it's good to see comparisons that look more than simply housing (and include income taxes, cost of transportation, etc.).

I often tell people:

"HK is a reasonably cheap place to live... once you have sorted out your housing."


This is an important reason why many people Buy, paying HK's high property prices. They can lock in a mortgage cost, and not be exposed to rising rents.


Or, better yet, they can buy a property with cash, and have no mortgage to pay. I suppose that is one reason why less expensive properties are selling well, especially in older, cheaper buildings.

"HK is a reasonably cheap place to live... once you have sorted out your housing


This is an important reason why many people Buy, paying HK's high property prices. They can lock in a mortgage cost, and not be exposed to rising rents.


Or, better yet, they can buy a property with cash"


How does that make sense? How does buying with cash or front-loading 30 years' worth of payments make Hong Kong any less cheap to live in? If a house cost a trillion dollars to purchase would paying for it in all cash make it any less expensive to buy? No, it's already too expensive.


Your first comment about it being cheap once you've sorted out your housing is like saying: "Yah this Rolls Royce is pretty cheap once you have already bought it."


The problem is that HK's property is already too expensive. That it might be increasingly expensive over time is a separate issue. Buying into its expensive price and then forgetting about the huge payment you already made does not make it any less cheap - it maybe only gives you some psychological comfort.


And if you want to discuss the increasingly expensive aspect of it then you need to consider financial aspects - what is the rental yield, can I invest my money in a productive asset that will yield more than my rent costs? If so then perhaps renting + investment is cheaper than buying a property.

RENTS are rising.


My girlfriend bought a property for under $3 Million, that she has rented out for nearly $10,000 a month.


If rents rise, she can raise her rent.

If prices drop, she can buy something newer and larger


Meantime, she is hedged.


The Rent she is getting now, is more than $1500 higher than when she first bought it at the beginning of 2014.


The money to buy it, was in the bank, earning less than 0.25% interest. Now it is earning over 3% net, rented out.


She borrowed a bit, but that is at a 2.25% interest rate, and the money to pay it off is now in Rmb, earning MORE than that, and with some capital gains.


How can this NOT make sense?


(BTW, I am not suggesting buying expensive properties with low yields. In essence, this is a low capital, low risk type proposition.)

Your response completely bypassed my point of something being too expensive today as it stands (and not just simply that it might / will be more expensive tomorrow... but just that it is already too expensive).


But anyways, to your new comment:


"If prices drop, she can buy something newer and larger"


how? If prices drop then her property price will drop as well and she cannot buy anything newer or larger. This is the fallacy of property wealth - people think "man my property is worth a million dollars today, I can retire on that!" But when they go to sell and retire in a new home they realize the new home costs a million dollars as well so they actually gained nothing and lost nothing.


The only way she can buy something newer and larger if prices drop is if she either A) uses new money [which is wholly irrelevant to this discussion] or B) never bought the first property in the first place and kept her money in the bank as dry powder for if / when prices drop [not suggesting that she should have done that, I'm just saying that is the only way to profit off of property price drops]


Why are we comparing bank yields to rental yields and nothing else? If we are going to discuss finance and investment then we need to consider the whole world of investment opportunities - its not as if bank deposits and property speculation are the only two things to do in the universe. If she likes yield she could have bought CLP stock and earned herself a 4.25% dividend yield. Buy owning stock she:


1) never has to deal with annoying tenants

2) never has to deal with fixing broken toilets

3) never has to deal with annoying property agents

4) never has to worry about making payments or receiving rental payments, CLP will pay its dividend like clockwork

5) not have to deal with illiquid assets that on a whim can have varying amounts of surprise stamp duties levied

6) never has to pay high transaction fees (agent fee, government stamp fees)


I'm not saying that her purchase was a bad one, all I am simply is saying is that she could have done many other things with that cash and that you cannot purely compare bank deposits to rental income and declare property king of the universe.

I never said that - that prices cannot fall - or that she was betting her whole future on this one asset:

("my property is worth a million dollars today, I can retire on that!").

Give me some credit for having some intelligence.

Part of her is... HOPING prices will fall.


If you plan to live in HK in the long term, and:

IF YOU DO NOT OWN A PROPERTY - THEN YOU ARE SHORT: Short rents, or Short on property prices. She was not comfortable that way when she bought the property.


How would she buy another property?

With her assets, incuding other assets, of course. Perhaps by liquidating her RMB deposits, which are currently earning more than the interest on the small 30% mortgage she has on the property. Or by selling the property itself, and reinvesting the proceeds along with her other assets.


Before she has to sell at a loss the price must first fall the 10% it has appreciated since she bought it. Then it must fall a few more percent, for the reduction made in the loan since she bought the property.


Had she left her money in the bank, as virtually everyone else on this thread has, she would have lost out on the rental income, and the price appreciation she has seen.


Show me another investment which can generate the same level of income, and also hedge (so very effectively) future rental / living costs, and we might consider buying it. Don't talk to me about shares, which carry many other risks (CLP owns a part of a nuclear plant in China, don't they? And their dividend is not guaranteed, nor is it linked to rental price increases.)


The transaction taxes on a property under $3 Million are pretty light : She paid a stamp tax of 1.25%, and will have no capital gain to pay after the present two year lease finishes.


The trick her is partly the SIZE of the investment, and the fact that she had money sitting in the bank on deposit earning a low return.


Many other HK people are opting for the same sort of shift out of the bank into cheap properties, which is why their prices have performed so well.


Here's a chart showing the price performance of one of the Lower Cost properties:


http://s10.postimg.org/ooz7p5y3b/TKT.png


See any signs of slowdown in this chart??


That may come, and probably will. But it is the Rental level we will be watching most closely.

You are really skipping my main points but whatever.


"Show me another investment which can generate the same level of income"


Link REIT. Dividends like clockwork, pure property play which you all love, and you can lever it to the moon with cheap brokerage financing if gearing yourself makes you happy. No transaction costs, no vacancy periods eating away at income, no surprise government taxes, highly liquid, can hold it in street name if you don't trust brokers, no broken toilets, no annoying real estate agents.


Just eyeballing the charts it looks like Link REIT has even pretty well matched property price appreciation all the while providing superior dividend yields.

L.,

There's a large 'basis risk' between the Rental income earned by Link REIT, and the Rents in the area where we like living.


I don't see what Main Points of yours I may have missed. It seems to me that you are missing mine:


She felt she was SHORT The HK property market - and it is a HEDGE ! What other way can you get effective protection from rising rents in a particular part of HK.


As I have posted elsewhere on this site, I think Kowloon station and Olympic station will outperform the rest of HK in the run-up to the completion of the XRL, and probably also for years to come.


I see no other good hedge, to buying a "cheap" older property within the area. But I am open to suggestions, and I like your idea about LINK - but think the basis risk is rather higher than we would like. (In a pinch situation, we could even move into the property - though I suspect we will not. Earning a 4%+ yield, while renting someone else's more modern property at a 3% yield seems like a good trade to us.)


I am also thinking about becoming a part owner in a small restaurant in the area, as another hedge. (That's a sort of hedge against the cost of eating out.)

Some mainland buyers (in today's paper) have defaulted. And the projection is that there will be more, and many of them have bought in the Kowloon area (around the XRL area). Specifically mentioned was Hermitage. Properties in these area will take a hit if the projection materializes.

punter,


Amusingly I directly was involved (in a very small way) with one of the issues reported in today's Standard article. I've mentioned this several times before as my personal anecdotal evidence of mainlanders buying multiple HK properties entirely on loans. What the Standard did not mention but I personally know is that one of those people was even more levered than the article suggests - he had pledged his properties as collateral on even more loans for other business ventures and those creditors were trying to foreclose on his property as well as the HK banks (but in the end the HK bank foreclosed and sold it half a year later).


But hey, what do I know about anything. Everyone here is cash rich trillionaires like Loyd says. Everyone is just rich rich rich and dropping 20 mil on a shoebox is like buying a hamburger at McD's.


...just because the loans do not show up in the official numbers does not mean that the loans do not exist.

@punter/Lucane01 - that's interesting. I would not mind seeing a few forced sales to help push the market down further.


FWIW, the HKMA numbers only include loans made by authorised institutions. Loans made by unregulated companies/individuals are not included in their data.

" ...many of them have bought in the Kowloon area (around the XRL area). Specifically mentioned was Hermitage"


This area has been popular with Mainland buyers. They have been especially big buyers of the highend properties - and now China is experiencing some increasing credit stresses, as I have been reporting on another thread.


It is possible that those foreclosures are pushing down prices at Imperial Cullinan (where there heavy sales to the mainland, especially of the most expensive properties), and maybe the largest properties in Hermitage.


My guess is these pressures will have little impact on the sub-$10 Million market that interests me most - but if the stress becomes great enough, I may be wrong.


I also do not see how foreclosures can help to reduce Rents in the area - that's the main thing we have been aiming to hedge.