The Hong Kong property market was showing the negative effects of the current economic environment around the globe. Between 2008 and 2009, residential real estate were on a downward trend. However Hong Kong’s residential price index has increased by 20% since the end of 2009, predicting a rise in prices in 2010. The rise is due to strong liquidity in the banking system and the further drop in funding cost

The Hong Kong property market is showing signs of revival from the economic downturn around the world. After residential real estate prices rose 25% in 2007, there were significant price declines in the last quarter of 2008.  Average prices in the luxury districts of HK grew 9.6% in the last quarter of November 2009. Following is information to assist investors decide if Hong Kong real estate should be part of their investment objectives:

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.

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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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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 investments 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 15% on the annual rent receivable minus a deduction of 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. Healy 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 number of residential units completed from January to May of 2010 is 4,975.  This represents 35% of the forecast.

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Healy 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