Putting all my eggs in one house

key question is, what will you do when interest rates go up to 5%? within 5 years that's a real possibility?


apart from that you risk is in the tenor and the leverage. can you ride it out?

I got a HIBOR rate with a cap so it NEVER exceeds the ref rate of P-2.5%.


Even if the prime goes up to 7 , the max you are locked in is for 4.5% net . DOoubt if you can do better than that when compared to other countries.

I would simply compare the rental you may pay in terms of money down the drain to a land loerd against the INTEREST ONLY cost from your mortgage. Effectively your mortgage is forcing you to save the money you are repaying as the principal.


Only down side is if in 5 yrs there is a crash and yo need to cash out and leave then

I would not do it, if half of your salary is going directly into your mortage. That proportion is too high. The usual rule of thumb is about 25-30% of your salary. Any interest rate rises would really hurt. Does your wife work too? That might bring the proportion down significantly.

Hi again Oly88


That sounds a bit better. I think that you also need to think about the difference between a home, and an investment. A home is a place where you want to live and be happy in the long term. A house for investment is something different.

One thing that you could try is to use an online mortgage calculator from a banking website and change the percentages and see how that effects your monthly repayments. You also need to think about if one of you lost your job, what would happen?


We recently (6 months ago) bought a flat in an area we like. But it's always a risk.

I'm not sure that you would loose everything if the price went down by 50%. You only loose when you actually sell the property (if you have to for some reason).

The value of my share portfolio fell by over 50% during the Global Financial Crisis, but because I didn't have to sell anything, it has recovered it's value now. But you need to be patient and not panic!

The thing is it's a place where you live, and you're not doing it for investment. If the market goes down then other places will also go down in value. The only issue you may have is if you're forced to sell and leaving the country, or if you decided to sell and only your building has gone down in value.


If everywhere goes down and you're looking to move to a new place then the new place will also have gone down by 10% too. If that makes any sense.


As for the comment above about the interest rate being capped... it's not really capped. You have P-2.5 (I got mine a few years ago and got P-3.15), the interest rate could go up to 10%... it's not capped it just means you won't pay 10 you'd be paying 7.5%. Given the size of the loan (and the number of years) a small change can make a huge difference in the monthly payments,

Olly88 some valid points by others but to answer your question about risk and affordability,I borrowed 20% of the Commercial VALUE of my property, (which was 70% of the BANK valuation) of the property. Dont ask how these numbers work but valuation and comemrcial value can be very separate things and a minefield in itself.

In terms of risk management. My mortgage is 10800 per month on a 3.0 million loan for 25 yrs. . At the present rate of interest my split is about 8600 towards principal and 2200 towards interest each month. Incidentally you can get a 17% tax break for the 1st 100k interst as well from the govt for your 1st home .

In my case even if the interest rates were to triple My Interest proportion does not break my back based on these sums. It goes up b y about 2k/month.

Secondly if i were to rent for say 15k per month its ALL the money down the tube. Here I am literally being forced to save 8k/month and my real expense if only 2.4k/month.

If you can see yourself staying for longer than 5 years if required, then do it. If 5 years is a hard limit, then I wouldn't put my life savings into it. HK property is too volatile to to put hard limits on timelines - you could get caught out.

Financial advice cannot be given in isolation without a full assessment being undertaken of your present financial situation including liabilities (of which nothing has been said), your risk appetite and future objectives. Assuming that you are single, getting married for the first time, about to have your first child and have stable employment prospects then your decision appears to come down to the attractiveness of real estate versus what you perceive to be a gambling stock market arena.

The alternative that is overlooked is to live in more modest surroundings and save.

Bonds carry value risks if you do not hold them to maturity and you should consider their exposure to rising interest rates.

A cash flow demand of 50% of your monthly salary for your accommodation does not in itself appear unreasonable, if the above assumptions stand. But you might take the time to forecast your approximate income and expenditure over the next five years. Particularly if you have non Hong Kong tax obligations as holding bonds and your intention to reside in Hong Kong for five years would indicate that you might do.

You would need to have a sound view of the integrity of the property and its title and an understanding of its likely maintenance profile going forward.

Then, what remains is for you to form an opinion on whether residential real estate in Hong Kong is likely to face a downturn in value at your five year realization point. And should that be the case will you be able to defer a sale until the market recovers?


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