To buy or rent?

Where is this market going. The government announces cooling measures and the market goes up faster.

I'm out in Tung Chung and the prices are going up on a daily basis.

I want to buy, but not at crazy price. How far will this market go before correction? Personally I dont see any reason for a correction in the near future, as a rate rise is no where to be seen.

Should I just rent for 12 months? Or will I miss my chance to buy back in? Im looking to leave HK in 2-3 years, so I dont want to be stuck with a property if it drops in value drastically. Would you buy in this market?

Any advise

our in-house economists are predicting interest rate rises in the second half of 2011 latest. i would wait for that coz any rate rise will surley lead to a correction

kiwimoa-Question is how long is a piece of string...It's impossible to answer because you have to be comfortable with your own financial situation, job security etc. I wouldn't worry too much about interest rates because they are so low historically speaking that even if they went from 1% to 3% which will take a while with the mess in America, it's still extremely low and considering that savings per capita in Hong Kong are approx 4 times higher than what they were in 97, thinking about interest rates will drive everyone crazy.

In addition it depends which market you want to enter, so if it is the top tier luxury or mid tier luxury market then I wouldn't worry about interest rates because majority of these buyers are paying in cash plus they need at least 40% deposit for anything over HKD12 million. Should you be below HKD12 million you still need min 30% deposit plus all banks are so careful with lending basis, as they work out changes in interest rates even if they go up you still need to meet loan repayments.

I think you should look at your own personal situation to make such a decision.

Wish I would be more helpful! It's a very hard decision to make, good luck!

My plan was to sell our flat in which we live (completion date july), rent for 6 or so months. I was hoping for a rate rise, so I could buy back in 10-12 months from now with lower prices. But all I can see at the moment is a crazy upward market and at this rate I will have to buy back into an expensive market.

HONGKONGEXPAT; I want interest rates to rise, this doesnt bother me, even if I own a property, as I want prices to come down.

My target market is around 5-6M, but even properties that were 5m 2 months ago, are now selling for over 6m in Tung Chung.

kiwimoa-Understand I have been here for 17 years and it took me 15 years to decide to buy. I bought beg of 2009, I was always trying to get the timing right, was too scared during the 97 crash because was too concerned with Asia completely tanking and then was too worried during SARS because I kept thinking if they block all ports of entry to and from Hong Kong, it would lead to such social unrest that you wouldn't even be able to sell property at building/construction cost.

The point is there is no perfect time, you will never find that, but I did drive myself crazy always predicting the bottom, so when Lehman tanked I immediately confirmed the vendors price for an apartment I was looking at, not thinking that perhaps of I wait until this or that I can get a lower price.

The issue is that I doubt interest rates going up even double or triple will play in great role because of the other points I mentioned. I think it depends more on external factors, say another crash in America or a meltdown in Europe, even though we are seeing world markets operating in more segregated terms, local Asian trade, Asia to Africa and South America/Middle East etc.

I understand you are looking at HKD5-6 million which is perhaps more price sensitive to interest rate movements, but you have to think that even if interest rates go up by double by the end of the year, the property you are looking at might be HKD7 million by then as opposed to HKD6 million now, so even if it comes down to HKD6 million you have a zero sum game and you are paying more for your repayment. You can lock something in now for a few years at a low rate and say within HKD6 million as per the current price.

My other suggestion and remember this is just a suggestion if you are planning to leave Hong Kong in say 3 years, do you really need to sell the place when you leave in 3 years? If you can hold the property long term perhaps you can look at another form of property investment. What I mean is you don't buy a place to live but a place that can offer you a better capital appreciation long term. At HKD6 million in today's market you can buy a smaller place in soho/central in an older building than what you can buy in Tung Chung but you have an investment in a prime area. You can get a history of Tung Chung pricing, for say the past 10 years and see price movements, I would say that long term they appreciate at a far slower rate than prime areas.

The rental will cover part of your mortgage, you can lock your rate in for the next 3 years, the only thing is for the older buildings you will need to put down more than the new buildings because bank property valuation will be lower than vendor asking price, whilst new buildings have closer valuations to actual vendors sale price. Additionally you will still have to pay rent wherever you live, but as you seem to be concerned with a property that might depreciate perhaps picking a top location would be a safer bet. There are no sure things but this could be something you can consider if you don't mind renting and having your property rented out and used purely as a long term investment, all depends on your needs.

Once again if we all knew the correct answer and had perfect timing, nobody would be working, just buying/selling property/stocks etc!

HONGKONGEXPAT, all valid points and I agree with you.


I have a young family, so central is hard for us and developments like the ones Tung Chung are great for kids. Also size for price is better than central. So, as much as I would like to go for location, I have to be practical as well. So my target property is one I dont have to pay too much for and that can be rented, if prices are low when we leave. Property out here rents easily, but doesnt have as good as cash flow and capital gain when you compare it to Hong Kong/Kowloon, but it's all a balancing act.

cheers for the reply, it all helps with the decision making when you can get different view points.

Hi we are also in TC and wanted to buy an A/H flat at Caribbean Coast, We are now playing the waiting game, these units are now 5.8 minimum and were for sale at about 3.9 about 4 yrs ago.

Actual asking prices on the internet are now not even what they will sell for, It's heavily overpriced now. This is only my opinion but I see a a bubble bursting soon, it will go up for now but then it will go down fast end of this year or next year! And I will be ready to move in on the market then.

Unless of course we have a repeat of SARS or swine flu then things will change earlier. Flu season started a couple of days ago so let's see what happens.

Hi Kyander,


Due to banks requiring higher deposits and properties with high rental income etc, I dont see the market dropping that much out here. If it does, then there will be even less on the market, as people will hold. That's just my opinion, but I feel the market is pretty stable, although the increase in price in some properties are unjustified. Last time the market went down out here, it was only by 30% and that was recovered within 1 year. Some think that with the bridge being built and additional boarder facilities etc being out here, there will be an increase in demand, so that might also help keep the price stable, if it does fall.


Have you considered DB, there are some good size properties out there, larger and for only about 1M more. I have been looking around TC and the A and D flats in Coastal Skyline and also the larger flats in Seaview Crescent are probably the most efficient.


So, it will be interesting to see where the market will be at in one year.

No one knows when a crash will come but this in something interesting to see: http://www.alsosprachanalyst.com/wp-content/uploads/2011/01/Hong-Kong-Real-Estate-History-in-a-chart1.png

during SARS you could pick up a house on seebee lane in DB for 3-3.5 million 1600s/f foot with garden, now they are 16million so there is no doubt we are going to be paying WAY over what they are worth now.

this was in yesterdays standard:

standard:http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=108691&sid=31500149&con_type=3&d_str=20110303&fc=7

it will fall, the question is when.

Kyander,

Things to consider,-large deposits now required to purchase, -new stamp duty for property sale, -Stability in China/global economy, -Oil Supply and -if/when interest rates will rise.


Yes I agree, interest rates will have to rise at some stage and there will be some that wont be able to afford their mortgages. But with large deposits now required and this sales tax, more people will just hold their property, including the speculators. Although the HK market is volatile, I cant see prices hitting anywhere near sars levels.


Will the HK Govt cause a market crash, by over supply? I would hope they would limit supply along with developers, if it was looking that way. Although the developers are buying up land, it does take quite a while to get flats ready for the market, so I cant see this oversupply that is mentioned in the link, as the developers will tighten supply.


Dont get me wrong, I am concerned with how high the market is, affordability and the market crashing. As you say, "it will fall", well markets always fall and rise, it's just a matter of how much the new low will be and how high this market will go. If the market went up another 20-30% before falling and it only fell 30-40%, then when is it best to buy? Only time will give us the answer. Like HONGKONGEXPAT says, If only we had crystal balls, none of us would have to work...