The Hong Kong property market is showing the negative effects of the current economic environment around the globe. After residential real estate prices rose 25% in 2007, there were significant price declines in the last quarter of 2008. Overall, transaction volumes in the last quarter of 2008 were approximately 69% lower than the corresponding period in 2007. Following is information to assist investors decide if Hong Kong real estate should be part of their investment objectives:

The Hong Kong property market is subject to further negative impact from the global financial market declines. Hong Kong has experienced positive GDP growth since 2004. The IMF predicts Hong Kong’s economy to grow by 5% in 2010, primarily due to positive spillover effects from China’s growth. However the economy is still vulnerable to external shocks; which may affect the countries growth rate. One of these shocks being the current property asset bubbles that have been forming in Asia.

Previous Hong Kong property market declines have been the result of i) excess supply ii) rising interest rates and iii) high property prices eroding buyers’ affordability. The current situation, however, has tight supply, low interest rates and more favourable affordability.

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Rents in the Hong Kong luxury residential market are predicted to fall over the coming year. According to a report by Colliers International, the average rent per square foot per month is currently US$ 4.67 (As of Feb 2009) and is expected to fall to US$ 4.07 (In Feb 2010).

The current global economic problems are causing analysts to forecast the Hong Kong property market could decline up to 20-30% during 2009 in the office and residential sectors, especially the luxury property market. The volume of transactions could pick up if sellers begin to lower their expectations to close the gap between the asking price and what potential buyers are able to pay.

Foreigners are attracted by Hong Kong's vibrant city and nightlife, hence making the Hong Kong property market and migration to Hong Kong popular for global investors. In the Mercer 2008 Quality of Living survey conducted by Mercer Human Resource Consulting, Hong Kong ranked 70th out of 215 cities around the world. Despite this ranking, the pollution in Hong Kong has caused many executives to relocate to other markets in recent years.

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The number of sale and purchase agreements by the Hong Kong Land Registry for all building units received for registration in January 2010 was 12,380 (+11.4% compared with December 2009 and +115% compared with January 2009)

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Taxes are payable on investment in the Hong Kong property market. The tax varies according to the total cost of the property. Property tax for owners of property in Hong Kong is based upon the property's rental income. The rate of tax is 16% on the annual rent receivable minus a deduction of up to 20% for repairs and outgoings. More information can be found on the Hong Kong Inland Revenue Department website.

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The current economic climate is causing banks to be more reluctant to approve property finance applications because of the credit risk. However, compared to US and European markets, the credit crisis is not as drastic because of the tighter lending criteria such as the maximum loan of 70% of the valuation. Asia Property Consultants assists clients obtain competitive international mortgages for their Hong Kong property market investments, working with international banks such as HSBC, ANZ Bank, DBS Bank and OCBC Bank

Hong Kong has the advantages of low corporate and income tax, a stable government, a central location within the region and economic freedom. It is for these reasons that international companies have chosen Hong Kong as their headquarters, contributing to traditionally strong demand for Hong Kong commercial property. There are no restrictions on any individual or corporation, whether domestic or overseas, to invest in the Hong Kong property market.

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The Hong Kong commercial property market is likely to experience a negative impact from the current financial market crisis. As a major financial market hub within Asia, the commercial property market is vulnerable to finance related companies having to find cost cutting avenues. Downsizing to smaller, or lower grade premises is an option companies will look for.

According to Hong Kong's Ratings and Valuations Department (RVD), the forecasted number of residential units to be completed during 2008 is 10,983. At the end of the September just 28% of those had been completed.

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Asia Property Consultants independently assists international property investors effectively and efficiently manage all aspects relating to transactions in the Hong Kong property market. Whether the client is seeking residential property if migrating to Hong Kong, commercial property for business needs or as property investment to expand global assets, our firm will provide relevant analysis of the market. In addition to our own experiences, reliable sources are used, including the Hong Kong Ratings and Valuations Department, Invest Hong Kong and the Hong Kong Monetary Authority.

For more information on the Hong Kong property market, call our Hong Kong office at (+852) 8331 1911 or contact us at email@healyconsultants.com