Investing in Hong Kong property is not an exercise for the faint-hearted. It's a fast-paced roller coaster of a financial ride that matches anything dreamed up by the city's most visible new infrastructural arrival, Disneyland.
During the past decade, prices have been battered by political storms, buffeted by killer epidemics and, on occasion, talked-up to speculative heights from where there was inevitably going to be a long, hard and painful fall.
Right now, property prices are on the march upward -- a 4,400-square-foot prime luxury home was recently leased out at $33,000 a month (all prices in U.S. dollars) -- a trend that has continued since the scary spectre of SARS stalked the streets of Hong Kong and spooked property investors. The confidence is, more than ever, linked to a booming Chinese economy; whenever China surges, the Hong Kong stock market and property market generally goes merrily along in the slipstream.
But this kind of conventional wisdom cannot always be relied upon. Just ask anyone who invested in bricks and mortar during the months immediately after the successful handover of Hong Kong to China on June 30, 1997. The transition went like clockwork, the economy was roaring ahead, the stock market was blazing away. What could possibly go wrong, mused the punters, as they piled wildly into the property market taking out second, third and fourth mortgages?
Neither they, nor anyone else, could have predicted the Asian financial crisis of late 1997, a catastrophic event sparked initially by the collapse of the Thai baht, that pushed Hong Kong property prices into a tailspin. Prices made a steady recovery during subsequent years, only to be clobbered once more by the SARS epidemic of 2003.
Despite that steady upward momentum, there are still homeowners in the city deep in negative-equity territory. The market has yet to climb back to late 1997 levels, a time when confidence was sky high and even shoebox apartments in not-terribly-salubrious areas were snapped up for $300,000.
"Right now, the outlook is positive, with economic fundamentals and tourism intact," says Kenneth Tsang, head of research for southern China at property agents Jones, Lang LaSalle. "The impact of interest rate hikes will place a short-term psychological barrier on prospective home buyers, but will have no major structural impact on the Hong Kong market. The market remains healthy."
So what, exactly, do you get for your dollar these days in Hong Kong? On offer recently in the expatriate enclave of Discovery Bay, a short ferry ride from downtown, is a four-bedroom townhouse, with balcony, for $2.5-million.
Another favourite area with upper-income-bracket families is Repulse Bay, on the south side of Hong Kong island, where a three-bedroom penthouse apartment, with sea view, is currently on sale for $3.8-million.
Rents have also edged upward in the past year, particular in the luxury market where the prime address -- from the colonial days of yore to through to the present -- is The Peak. A townhouse described as ultra luxurious with a panoramic view of the (non-harbour) south side of Hong Kong island is going for $18,000 a month. Furniture, and a small garden, is included.
Other areas proving popular are those close to the border with China, in the northern part of the New Territories. Improved transport links, with more on the way, make it easy to live in Hong Kong and still be within striking distance of the main crossing at Lo Wu for commuting trips into the southern city of Shenzhen and its surrounding industrial zones.
Other investors have taken that logic a stage further and bought property in southern China, either as second home, as part of an investment portfolio or as a prospective retirement home.
Back in Hong Kong, Canadian entrepreneur Christopher Lenz has had almost every property-related experience during his 14 years in the city -- initially as a live-aboard yacht owner and later as a commercial and private tenant, landlord, homeowner, office owner and even a warehouse owner.
Mr. Lenz, originally from Thunder Bay, Ont., arrived in Hong Kong to work as a hotel food-and-beverage manager but quickly caught the entrepreneurial bug. Many thought he was crazy to take over two floors of office space in an unfashionable part of town to open Igor's, a horror-theme restaurant. It proved to be a rip-roaring success and, when it had run its course, the caves, dungeons, skeletons and cobwebs were moved lock, stock and barrel for a successful run in Singapore.
Mr. Lenz currently runs 14 outlets in the city, including pizza parlours, a supper club called The Cavern, a waterfront restaurant in Stanley village and the Canadian-themed bar Stormy Weather.
During the past year, he has witnessed commercial property rents rise with alacrity: In recent weeks there have been howls of public protests from restaurant and bar tenants who have had new leases offered at hugely inflated amounts.
"There are dark clouds in the sky and they are vultures -- the landlords," says Mr. Lenz, whose own properties are locked into leases for the next two years. "I have heard of cases where the rental has been tripled."
He says his own successful dabbles in the property market have been more through happenstance and circumstance than a financial master plan, but he has had notable coups.
An investment in converting properties in which to house visiting bands for his supper club has reaped dividends; buying a warehouse again proved to be a smart move, as did investing in a home.
The 39-year-old purchased an apartment for $750,000 (U.S.) four years ago, before selling it recently for $1.3-million, reasoning that higher interest rates, and a likely peaking of the market, meant the time was right to go back into the rental sector. For the same reason, he is thinking of selling office space, bought for $160,000 and now worth close to $500,000, and returning to the rental market.
Another Canadian, Terry Dunne, has taken the reverse route, abandoning the rental market for a home in the New Territories, which was built from scratch on the site of an old farm.
Vancouver-born Mr. Dunne, a bank supervisory analyst, had been paying $2,000 in rent for an apartment in the bustling Tsim Sha Tsui nightlife and shopping zone. When he and his wife, Abe Chung, decided to start a family -- baby Mary was born recently -- they figured the time was right to put down more permanent roots, building the new home for a cost of around $40,000.
Although Mr. Dunne is located out in the sticks -- watching hockey in a sports bar, for example, entails a trip to the downtown area -- there are the compensations of fresh air, a fabulous mountain view and an ample-sized garden. "I didn't even know there were owls in Hong Kong until we moved here," he says. There are other enclaves of like-minded outdoor lovers, notably in the outlying villages of Sai Kung and Shek O and the bargain-basement island of Lamma.
But for many people, being within easy reach of Central is essential for work. And that means biting the bullet on property, whether it's renting an exorbitantly priced apartment or buying a home that's subject to the particular vagaries and fickleness of the Hong Kong market.
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