Hong Kong residential real estate prices rose 25% in 2007, a sudden surge compared to the softer 4% growth in 2006. The high-end Hong Kong property market was even more vibrant, a Knight Frank report showing prices up 45% in Mid-Levels in the year to March 2008. However, residential transaction volume in August 2008 was 60% lower than in November 2007, indicating the start of an expected downturn. The following information will help you determine whether Hong Kong real estate is the optimum strategy to fulfill your international strategic investment objectives:

1.

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.

2.

Hong Kong real estate remains vulnerable to global financial market turbulence and uncertainties over the US sub-prime mortgage crisis, which could further slow Hong Kong's economic growth. The graph on the right shows positive GDP growth in Hong Kong, but a declining year-on-year growth rate.

3.

Colliers International predicts the luxury residential market in Hong Kong to be impacted by the current economic crisis. Despite third quarter prices of 2008 remaining flat, asking prices are starting to fall. Colliers' report predicts luxury residential rents may decline 15% over the next 12 months (towards the end of 2009) while property values may decline by between 15 and 20%.

4.

In September 2008 the Hong Kong Land Registry received 7,369 sale and purchase agreements for all types of building units, up 15% from August but 30% down on the same period last year. The total value was 29% less than this figure in September 2007. Of the 7,369 sale and purchase agreements, 6,075 were for residential units, higher than the month previous but down 30.6% from the same period a year ago

5.

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 26% of those8 had been completed, which could signal attempts to maintain tight supply.

6.

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 2008 Quality of Living survey conducted by Mercer Human Resource Consulting Hong Kong ranked 70th out of 215 cities around the world. That said, many executives have relocated from Hong Kong to Singapore in recent years, citing health concerns from living in Hong Kong caused by environmental pollution.

7.

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.

8.

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.

9.

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 to 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.

10.

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 ito 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