Hong Kong residential real estate prices dropped by 13% in 2009, a sudden decline compared to the more optimistic 18% growth in 2008. However, the last quarter saw significant 9% price incline in the residential market. Properties with lump sum payments of HK$10 million (US$1,290,156) or more had a transaction increase of 100% from 82 in 4Q 2008 to 164 in 1Q 2009. Volume of sales transactions predicted to grow another 15-20% as long as stock markets and lending policies stay positive. The following information will help you determine whether Hong Kong real estate is the optimum strategy to fulfill your international strategic investment objectives:

1.

The luxury end of the market, has seen a purchasing price increase of approximately 22% QoQ to HK$12,955 (US$1672) per sq ft in May 2009. This increase in liquidity and optimism in the housing market was due to investors believing global recovery being imminent and therefore taking advantage of the cheap financing sources. According to Colliers International, luxury residential capital values are predicted to rise by 5% during August where as rentals are expected to continue to fall by 3%.

2.

Hong Kong real estate remains vulnerable to global financial market turbulence and uncertainties over the US sub-prime mortgage crisis. The credit crisis and barriers to obtaining finance are factors that will impact on property market prices.

Reasons for previous Hong Kong real estate downturns included i) excess supply ii) rising interest rates and iii) high property prices eroding buyers’ affordability. The current situation is different, however, with tight supply, low interest rates and more favourable affordability.

4.

In April 2009 the Hong Kong Land Registry received 9,856 sale and purchase agreements for residential building units. Compared to April 2008, this represents an increase of 9%. The increase in total value was also approximately 1.85%.

Grade A office sectors rent values continue to fall by 12.1% Q0Q to HK$41.79 (US$5.4)per sq ft per month as of end of May 2009 and are expected to decrease by another 15% over the next year.

Hong Kong is ranked 5th in Global Property Guide's list of World's Most Expensive Residential Real Estate Markets 2009.

A Reuters poll of analysts at the end of November showed that Hong Kong apartment prices were expected to drop 20 percent by the end of 2009. GFI Colliers, a brokerage house specializing in derivatives, says the market indicates that property investors are betting that Hong Kong prices will reach a bottom in December 2009, falling at least 25 percent below present prices. Hong Kong real estate transactions fell to a 17-year low in November 2008, down 87 percent in value from a year earlier. All according to an article published by the New York Times.

The Urban Land Institute and PricewaterhouseCoopers (PwC) put the Hong Kong third among the top five Asia Pacific cities to invest in its 2009 report of Emerging Trends in Real Estate in Asia Pacific. The report also predicts that residential rental yields in this sector to drop by 15 percent and capital values to plummet by 20 percent in 2009.

9.

Hong Kong's vibrant city and nightlife is attractive for many foreigners as a place in Asia to live and work, hence making Hong Kong real estate and migration to Hong Kong popular for global investors. In the Mercer 2009 Quality of Living survey, conducted by Mercer Human Resource Consulting, Hong Kong ranked 8th out of 215 cities around the world in terms of infrastrcture. Many executives have relocated from Hong Kong to Singapore in recent years, citing health concerns from living in Hong Kong caused by environmental pollution.

10.

Colliers International reports that according to the Land Registry of the Hong Kong SAR Government, the number of building unit transactions increased 59.9% month-on-month (MoM) to 8,062 in March 2009.

11.

Hong Kong boasts low corporate and income tax, a stable government, excellent geographical location and economic freedom. As such, many international companies have made Hong Kong 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 own Hong Kong real estate.

12.

Occupancy costs have decreased by 22%, due to the recession causing tenants to leave the CBD area for lower rents in decentralized areas further out of the city. According to DTZ  2010 Global Occupancy Costs Report, Hong Kong is one of the most expensive places to have an office; Total occupancy cost per workstation per annum is US$16,970.

13.

Stamp duty taxes are payable on the purchase of Hong Kong real estate, the rate of which varies according to the total cost of the property. Owners of buildings in Hong Kong are charged property tax, which is based on the property's rental income. The rate of tax is 16% on the annual rent receivable less a statutory deduction of 20% for repairs and outgoings. Detailed information can be found on the Hong Kong Inland Revenue Department website.

14.

Because of the current economic climate, it is becoming increasingly difficult to obtain finance to support Hong Kong real estate investment. Interest rates for mortgages in Hong Kong are in the range of 3-3.5%, Asia Property Consultants assists clients obtain the most competitive international mortgages for their investment, working with international banks such as HSBC, ANZ Bank, DBS Bank and OCBC Bank.

15.

Asia Property Consultants independently assists international property investors effectively and efficiently manage all aspects relating to the purchase and sale of Hong Kong real estate. 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, we source latest real estate market information to enable us to offer honest, reliable opinions on i) Hong Kong real estate cycles ii) the current and future outlook for Hong Kong real estate and iii) expected interest rate and currency movements and their impacts on Hong Kong real estate. In addition to our own experiences, our sources include statistics and forecasts from reliable, reputable sources including the Hong Kong Ratings and Valuations Department, Invest Hong Kong and the Hong Kong Monetary Authority.

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