Why you should not invest in Hong Kong real estate in 2021

Why you should not invest in Hong Kong real estate in 2021? That will be the topic of today’s article.

Whilst there are always positives and negatives associated with every investment, this article will explain some of the reasons why you shouldn’t invest in the market.

If you are looking to invest in more productive assets, don’t hesitate to contact me, email (advice@adamfayed.com) or use the WhatsApp function below.

Introduction

The future of the Asian investment market was tempting promising until the COVID-19. This was exactly the region of the world, in which the transition from words to the case occurs without special “pauses” and long reflection.

Today, any investor will be able to know in advance of all risks and income from the investments of its capital in Hong Kong and in China. Investigating a large cash in Asia can be a little risky in 2021. This blog post is intended to show you all the disadvantages you can face if you invest real estate in Hong Kong now.

Hong Kong was always a reliable investment of capital. All roads were leading to Hong Kong. 

Hong Kong does not get tired of taking successful entrepreneurs who are “carrying” their capital here. The reason is simple, it lies in the one hundred percent success of almost any business being checked here. In Hong Kong, investments are invested in all industries, as this is a place where you can collect “cream” in all types of business. Investments done here are tomorrow’s income.

Speaking about the real estate market, it is worth noting that it was 2014 which attracted special attention to itself. The increase in the value of various objects in this market showed a dynamics of 15-20% year in annual terms, both in the rental sector and in the purchase / sale sector.

The real estate market of Hong Kong does not give their positions. Due to the fact that businessmen discover new companies in Hong Kong, the demand for office real estate shows a stable growth. Therefore, investments, especially in office (commercial) real estate, bring good and stable income here to their owners.

The scheme, thanks to which the money from all over the world is spinning in Hong Kong, wisely and strategically correctly calculated for many decades ahead. Entrepreneurs who want to make money in China use Hong Kong as an important starting point. The same applies to those who strive to multiply their capital in the countries of Southeast Asia.

Undoubtedly, using Hong Kong as a platform for business in Asia, any entrepreneur will win. China and Hong Kong signed a sufficient number of agreements on mutual economic and trade relations, consolidating future success in advance. The benefits of these agreements primarily on the hand of the businessmen themselves who want to work in China.

A large number of various “business benefits”, ranging from tax and completing a solid legislative basis, protect investments that invest business people from different countries, both in China (through Hong Kong) and in Hong Kong itself.

Investment environment of Hong Kong: Risks and profitability

Among the large number of investment programs existing in Hong Kong, foreign investors are provided with their main directions, given the level of low, medium and high yields.

Among more than two thousand different investment programs that Hong Kong has, the low annual yield level is from 5% to 8%, the average annual yield from 8% to 15%, and the level of high annual yield is 15% – 30%.

The risks of investment investments are also divided into low, medium and, accordingly, high. The choice of risk level is carried out completely at the investors themselves, since the invested cash capital will have to bring appropriate interest income.

Speaking about the reasons for investment success in Hong Kong, as well as about the desire of many businessmen to create a business in China, it is worth noting that since 2006 in China began to create investment funds. 

The accumulations of these funds were in the yuan, and these funds were created for banks and specialized companies in China. Thus, the economic and commercial interpenetration between China and Hong Kong affected the increase in investment companies in Hong Kong and already in 2014 the number of Chinese investment companies in Hong Kong reached 220.

The growth of financial volumes of specialized companies and investment departments with Hong Kong banks has reached two trillion US dollars already at the end of 2013, more than half of which belonged to international investment funds located both in Hong Kong and and and its limits. Most of these money was aimed at the development of the economy of China and Hong Kong, and the remaining distributed to the countries of Southeast Asia.

BUT, what are the risks when investing in a Hong Kong real estate?

It will always be risky when investing in any property, promotions, funds, etc. That’s why you always need to know about your admission to risks to avoid losing everything, if something goes wrong with your investment.

Although this is one of the most expensive what you do, investing in the Hong Kong property, is usually classified among low risk investments. In the end, most properties will continue to go up. Real Estate Purchase remains inaccessible for most residents in Hong Kong.

That is why those whom is lucky to be able to afford to invest in it, can really benefit from rental yields. Hong Kong can pass through a free drop in terms of prices, you can be sure that it will not be forever. Ultimately will eventually rise, and it will help you get more from your investment.

Of course, the promise that the horizon is extended on the horizon. As an investor, you should be concerned about the risk that you accept how you invest in the Hong Kong property.

So what are different risks when investing in the Hong Kong property?

Negative capital.

It simply means that you should more than the actual value of the property. According to the news published in Hong Kong Business, the conditions of the housing market cause banks to weaken mortgage restrictions, offering up to 90% LTV (credit ratio to value).

As experts say that the Hong Kong market has yet to reach the bottom of the property cycle, it is almost a guarantee that those who receive 90% of LTV mortgage will ultimately be negative capital.

When this happens, you will be technically in the loss of your investment. Of course, you should not be too fast to sell real estate when it happens. You must wait for it until you decide the real estate cycle before deciding whether you sell or not.

Low rental yield.

Another risk in investing in the property of Hong Kong is when the yield from rental income is made at risk of ROI (return on investment). According to the global real estate management, the gross profitability of the housing market Hong Kong is only 2%. This means that the profit is quite low.

Although this is what you should be concerned with, there is one truth that you need to remember. High housing prices in Hong Kong will ensure that there will be enough demand for rented properties. In this regard, your security investments. This is low, but the income will be continuous.

Of course, you need to remember that low rental in Hong Kong is still relatively high compared to other cities. If you keep in a good place if you hold your unit and buy property in a good location, you should be in order.

Interest rates.

The other risky point is that you need to consider is the interest rate. Remember that it will affect your mortgage payments. Since real estate prices in Hong Kong Roads, you are definitely going to borrow money to pay for it. The high interest rate will jeopardize the low yield of the lease of your device. The key to become risk to keep a good credit rating so that you can refinance the lower mortgage rate.

The share of vacant.

Obviously, if there is no one in your rented property, you will not earn anything. That is why the level of vacancies is one of your largest enemies in investment property. But, as we said, this risk is not a very big problem in a densely populated city as Hong Kong.

According to the article from the South China morning post, the lease usually falls when the supply of the body increases. This is not a problem in the housing market in the city, because in fact there is a low delivery of units. Tenants have fewer options, so the position of the vacancies will certainly be low in this city.

Tenants.

Your tenant is also one of the risks when investing in the Hong Kong property. They can break your device if you have not chosen them properly. Of course, the proper insurance and security from the tenant can help cover the cost. Nevertheless, something more serious, like fire, can completely destroy its rental property. So very gently choose the tenant and make sure to check the links to the characters.

Natural disasters.

Another risk that can jeopardize the value of your rental is a natural disaster. According to Bec.org, Asia is one of the most distress regions.

Although Hong Kong is not as bad, like other areas in Asia, we can still be amazed by a bad typhoon, and then. With the climate change problem, you need to maintain tabs on how it may affect the region. If you still have to invest in real estate, make sure you buy from the location that can survive climate problems.

Structure of property.

Finally, the last risk that you will take as a real estate is the structure of ownership. Since most real estate units in Hong Kong are in buildings, you need to check the entire building before investing. The block may look new and modern, but if the building has become old, it may be a problem. You must also familiarize yourself with such common areas, such as hallways, lifts, etc. This will affect the appeal of your rental.

How to minimize the risk of developing property:

  • Get insurance. Although it is not necessary, the property owner is encouraged by a mortgage lender to take insurance (for example, a fire, a risk of third-party, etc.).
  • Keep your credit rating high to facilitate refinancing at low interests.
  • Rent a good real estate manager to save the vacancy.
  • Tenant screens and make sure that the contract they will sign will clearly assert that they are responsible for the content of the interior of the property.
  • Do not delay the service or repair. It will keep structural problems from worse. It is better to treat this while the problem is small.
  • Have an emergency or operating fund for rental rental. This will allow you to spend on emergency real estate costs.
  • Pay your taxes – save it from the compromise of your rental income.

Although risks in investing in the Hong Kong property can be sufficient that it does not mean that you cannot prepare for it.

10 Basic tips before buying real estate abroad: for beginners

Buying real estate abroad is a complex process. There are some common issues related to the purchase of properties, such as what size and style of real estate 

you are looking for, location and price range and etc. 

However, with foreign real estate, however, it is also necessary to actually factor in all matters related to the international purchase for investing in foreign real estate. Travel and legal issues come to mind when discussing this topic and buying international real estate abroad means that it is immediately fighting these problems.

It goes without saying, you can easily find tips and recommendations. The presence of an orderly resource with some major consideration advice and remember when buying real estate abroad is extremely useful.

This is exactly what you have in front of yourself right now. This guide presents some of the main advice on the purchase of real estate abroad, covering a number of topics. Go to us in the coming days to hear even more advice on other specific topics related to the purchase of real estate abroad.

1. What is the reason for buying overseas property?

This is arguably your most important consideration when buying property abroad, as it will have a direct impact on everything from your budget to the type of insurance you invest in. If you are buying real estate, for example, for the purpose of investing, you will need to fulfill all financial decisions in accordance with the expected return. However, if you are buying a home for the purpose of relocation, you will need to focus on standard considerations such as neighborhoods, local amenities, and the school’s reach.

2. The need for financing

With a clear understanding of your motivation, choosing viable properties in accordance with your needs, is a relatively simple process. 

Ensuring financing is a much more complex exercise, however, especially when you consider the fact that it will be subject to international laws and is usually discussed in local conditions. 

As a starting point, you will definitely receive a “agreement in principle” before the purchase confirmation, as it will protect you if you do not extend the loan and allowed you to return your initial deposit.

3. Consider your tax liability 

Tax circumstances are all different, and this is especially true in a variety of and changeable real estate market. 

Each nation will have its own unique part of the tax laws and legislation that may require you to pay off costs, such as the heb provision, the tax on the transfer of rights or even inheritance tax in the purchase point. 

In addition, some countries also require home owners to pay land tax as a state of mortgage, and this is usually an annual cost that can eat into your capital. These potential costs should also be taken into account in your budget, as otherwise you may encounter significant legal punishments.

4. Understand the cost of local money and exchange rates

According to a similar note, it is also worth understanding the cost of local currency and any related exchange rates. If you intend to bring money from your own country abroad at different points, you may also need to get a certificate of import and open a local bank account. 

It makes it much easier to repay child tax debts and legal fees on time, as you can quickly install a series of permanent orders according to your requirements. If you are going to perform a smooth and trouble-free transaction, it should be considered a decisive part of your preparation.

5. Get an independent assessment

If you bought a house in the UK, you would not have thought twice about the request for a structural survey and an independent assessment. 

Many investors cannot do this when buying international property, however, due to the cost and material and technical tasks of organizing these tasks from the remote location. 

Obtaining an independent assessment and guarantee of property integrity is a fundamental part of any real estate transaction, and it is important to remember that any cost is a small price to pay for large investment.

6. Overcome the language barrier

Even if you are not going to constantly move, you will still need to directly engage in international sellers and agents when buying real estate abroad. 

This may be a problem with respect to any language barriers that can easily create a discrepancy and or delay the completion of the transaction or have a negative impact on the cost. 

Although you can overcome this by typing time to find out the appropriate language, it is often much more so that it effectively use legal professional services with knowledge of transportation.

7. Need to confirm the name and property

Given the remote nature of international investment in real estate, it may be difficult to develop confidence with suppliers and agents. 

This means that you must be extremely careful when discussing issues such as name and ownership, especially as any debt that exists on property can be transferred to you when the transaction has been completed. 

If the developer has previously borrowed money to complete work and not pay off, for example, you can be responsible for redemption and any affiliate expenses as a new owner.

8. Explore the locals and local amenities

Even if you are comfortable with financial and tax aspects of the purchase of real estate abroad, you still have to conduct research in place, its transport links and local amenities. 

This is especially true if you intend to live there, although investors must also have knowledge of the region if they have to successfully miss their property and generate a consistent return. 

When buying Holding Home For lease purposes, you must also be sure that during this period it is quite possible that in this period it was investigated without peak times.

9. Do you have an exit strategy?

Here you intend to move at the international level or develop a global investment real estate portfolio, it is important to remember that even the best plans sometimes go will be inexplicit. 

Therefore, you will need a suitable action plan for emergency situations and a release strategy, as it will minimize any inconvenience caused and the potential for financial losses. 

For those who hope to move, therefore it is important to maintain strong links in your country of origin and ideally maintain existing property for a predetermined period of time. Investors will also have to keep mastering in the global real estate market and prevailing economic trends, since these factors can dictate to the need to sell or change the strategy.

Pained by financial indecision? Want to invest with Adam?

Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 253.2 million answers views on Quora.com and a widely sold book on Amazon

Further Reading 

In the answer below, taken from my online Quora.com answers, I spoke about the following issues and topics:

  • As a British expat in my mid 20’s what tips can you give to retire in your 40’s? 
  • Why can US expats overseas invest more (sometimes) than they can when they live in America?
  • What changes can we expect expats in the Middle East to face in the next few years or decade?
  • How can stock markets go up during a pandemic?

To read more click on the link below.

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