Buying property, Hong Kong style

[Grey Fox]

to China!

[Ed Anger]

500 square feet.  :pinchL

[Valmy]

There are only 5 or 6 large developers in Hong Kong, all with annual revenues in the tens of billions.  For real estate agents, there are only two large chains.  The agents and the developers have lots of standing agreements that are mutually beneficial.  There is no reason why they want to change that.

This is why having industries dominated by a few big powerhouses always sucks ass.  Small business is better for the consumer.

[Zanza]

What kind of rent can you get for a 500 square feet appartment in a bad location in Hong Kong?

I happen to know, because my brother in law is renting such an apartment right now.  He pays about US$700 per month.  The landlord however is responsible for costs such as -

- management fees (trash collection, cleansing of public corridors, maintanence of lifts, security etc)
- property taxes
- profit tax on rental income
- repairs

So how does anybody earn money on renting property? Value appreciation of the property?

[Valmy]

So how does anybody earn money on renting property? Value appreciation of the property?

Even with no taxes and tiny interest rates could you actually make your payment and pay for the rest of that stuff and still make money charging $700.00 a month?  Heck in that market I would just rent forever.

[lustindarkness]

Some of these mono stories of HK are like some cheap scifi movie of some weird distopia or such.

[saskganesh]

So how does anybody earn money on renting property? Value appreciation of the property?

Even with no taxes and tiny interest rates could you actually make your payment and pay for the rest of that stuff and still make money charging $700.00 a month?  Heck in that market I would just rent forever.

I pay $800 a month. I can rent for ever. If I ever buy something, it has to have soil, not just be a concrete cube in the air.

[DGuller]

I can't help but think that this is an extremely inefficient arrangement.  If you have hordes of people willing to pony up $400K for a tiny apartment sight unseen, then obviously you don't need to whip up any hysteria.  Why wouldn't a developer just set up a silent auction and maximize his take? 

The first-come, first-serve system that you described is even more idiotic.  If you have lines where early spots are very expensive commodities, then you're obviously low-balling your prices.  Why, why, why?  It just seems like the developers are morons who don't understand how supply and demand work, and are leaving big money on the table.

[saskganesh]

I think they understand supply and demand very well and they know how to market to their customers in order to make many quick sales.

it's an interesting mix of high pressure techniques to reinforce impressions of scarcity and also to whip up crowd dynamics. the free drinks help.

[Monoriu]

What kind of rent can you get for a 500 square feet appartment in a bad location in Hong Kong?

I happen to know, because my brother in law is renting such an apartment right now.  He pays about US$700 per month.  The landlord however is responsible for costs such as -

- management fees (trash collection, cleansing of public corridors, maintanence of lifts, security etc)
- property taxes
- profit tax on rental income
- repairs

So how does anybody earn money on renting property? Value appreciation of the property?

In Hong Kong, the per month mortgage payment on a flat is generally lower than the rent that the flat generates each month.  The latest interest rate on a mortage is about 2%.  So a cheap way to buy a flat is to just put 30% down, rent it out, and let the tenant pay for the mortgage.  And yes, most landlords make money not from rent, but by capital appreciation.  Remember, there is no capital appreciation tax in Hong Kong.

[Monoriu]

I can't help but think that this is an extremely inefficient arrangement.  If you have hordes of people willing to pony up $400K for a tiny apartment sight unseen, then obviously you don't need to whip up any hysteria.  Why wouldn't a developer just set up a silent auction and maximize his take? 

The first-come, first-serve system that you described is even more idiotic.  If you have lines where early spots are very expensive commodities, then you're obviously low-balling your prices.  Why, why, why?  It just seems like the developers are morons who don't understand how supply and demand work, and are leaving big money on the table.

What Sask said.  There are flats which go unsold for decades, and there are flats that are sold within minutes of appearing in the market.  There are of course lots of reasons to explain the difference, but sales technique play a role.  My parents in law for example did not plan to buy a new flat prior to entering the show room.  All the hype and expectations of scarcity pressured them into signing the contract.  Those are essentially boiler room tactics.