Hong Kong: The growing real estate market catching eyes across the globe
Over the past thirteen years, Hong Kong’s residential property prices have skyrocketed by 275% (165% inflation-adjusted), including spectacular growth of 28.5% in 2009, 21% in 2010, 25.7% in 2012, 13.6% in 2014, and 14.7% in 2017. In contrast, real incomes have virtually stagnated in Hong Kong for years.
However, due to the combined impact of market-cooling measures, violent protests, the US-China trade war and the ongoing COVID-19 pandemic, Hong Kong’s housing market has stabilised over the past three years.
Hong Kong’s residential property price index rose by a modest 2.85% year on year in November 2021, following a minuscule annual increase of 0.2% during 2020, according to the Ratings and Valuation Department (RVD). When adjusted for inflation, residential property prices increased by a minuscule 0.95% over the same period.
Variations in price movements per property size and region.
Apartments smaller than 40 sq. m: prices fell slightly by 0.7% y-o-y in November 2021, to an average of HK$ 185,661 (US$ 23,813) per sq. m.
40-69.9 sq. m. apartments: prices rose by 2.7% y-o-y to HK$ 186,681 (US$ 23,944) per sq. m.
70-99.9 sq. m. apartments: prices dropped 1% y-o-y to HK$ 213,881 (US$ 27,433) per sq. m.
100-159.9 sq. m. apartments: prices rose by a minuscule 0.6% y-o-y to HK 243,260 (US$ 31,201) per sq. m.
Apartments with sizes bigger than 160 sq. m: prices fell by 5.9% y-o-y to HK$ 249,677 (US$ 32,024) per sq. m. in November 2021
Despite the stagnant prices, demand is surging. In the first eleven months of 2021, the number of property transactions in Hong Kong rose by 28.5% y-o-y to 69,152 units, while sales values soared 40% to HK$ 685.4 billion (US$ 87.9 billion), according to the RVD.
Can foreigners invest in Hong Kong real estate?
Technically, no freehold land exists in Hong Kong – all plots are leasehold. Yet it remains more complicated than that in practice.
When the British gave control of Hong Kong back to China in 1997 it was done so under the condition that all land would be on a lease for 50 years. Therefore, all land is leased from the Chinese government until the year 2047 by law.
However, few people expect much of anything to happen in 30 years. The general consensus is that all leases will be renewed, probably free of charge, once 2047 arrives. Taking people’s land would ruin everything which made Hong Kong successful and achieve nothing.
The Chinese are certainly a practical bunch. That’s why they kept Hong Kong within its separate system from the mainland in the first place. Why ruin something that clearly works?
Of course, that also means foreigners enjoy the same “ownership” rights as locals when buying Hong Kong property. Just remember that you’re technically on a long-term leasehold and don’t actually own your asset.
How much are property taxes in Hong Kong?
Hong Kong property taxes are payable when either renting out or transferring your apartment. Taxes are high when compared to other housing markets in Asia as well.
Every kind of real estate here is bought and sold on a leasehold basis. As a result, you are not required to pay annual tax on Hong Kong property if you aren’t making any income off it.
On the other hand, a tax of 15% on the property’s rental income is payable if you’re renting it out. A deduction for repairs and maintenance applies and the rate is always assumed as 20% of rental income. So effective taxes paid on rental income are around 12%.
You must pay stamp duty if you’re transferring real estate in Hong Kong too – or I suppose it’s rather the rights to a lease.
Property tax rates in Hong Kong vary widely based on whether you’re foreign or a permanent resident, if you own other real estate in Hong Kong, the value of the property, and the amount of time you’ve owned it.
In summary, stamp duty in Hong Kong can be as minimal as 1.5% of its total value or as high as 32%.
So, if you are interested in finding out more about how to make Hong Kong your next investment, as well as other opportunities to develop your business, contact us today! Below this article, you will find a link to set up a consultation with us to discuss your options further.
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