Kevin and I went to Hong Kong on a bit of a business trip. As citizens, more or less, we can go back whenever we want. But since no one is actually a citizen of Hong Kong, we wanted to make sure we kept our citizenship while living in Taiwan.
As permanent residents, we have the “right of abode”, which means we have unrestricted access to enter, live, work, and vote in Hong Kong without visas or any other government approval. Since we live in Taiwan, we will lose that right if we stay out of Hong Kong for three years or more. At that point, we would be given the “right to land”, which retains the right to enter, live, and work, but loses the right to vote. Since Hong Kong will be going through a few political changes in the next decade, we both want to vote as early and often as possible.
The easiest solution is to simply take a trip to Hong Kong every once in a while. The three year clock starts from the last time we leave the country, not from the last time we lived there. But there are rumors that the current system will soon change and people will have to be physically present for at least three to six months at a time, similar to quite a few other countries. Rumors about the Chinese government making one change or another are a dime a dozen, but at the same time, they actually do make sweeping changes with little warning. While this particular rumor might never come true, it could also be officially announced tomorrow.
China also launched a bit of a pandemic in 2019. While it never really affected our ability to travel to and fro, the next one might. There could conceivably come a time when Hong Kong and/or Taiwan blocks entry even to those with the legal right to enter.
Lily does not have to worry about any of this. While she was on a work visa in 2016, she left Hong Kong long enough to lose the visa. Even though she lived in Hong Kong just as long as Kevin, and longer than I did, she only entered in 2016, according to the government. The previous years she lived there stopped counting as soon as she lost her visa. Since it takes at least seven years before anyone can even apply for permanent residency, she would not have been eligible until 2023, had we stayed.
Hong Kong is unique, as far as Chinese cities go. Anyone who is a citizen of any other Chinese city is a Chinese citizen. They can leave their city, or even China, for an entire lifetime and retain their Chinese citizenship. Unless they formally renounce it. But being a citizen of Hong Kong does not make one a Chinese citizen. As such, there are more than a few loopholes for people who want to retain their citizenship, but do not physically live in Hong Kong, for one reason or another. All of those loopholes involve spending money that benefits Hong Kong. A good number of people own businesses in Hong Kong while living elsewhere. As long as their business makes money, they are more than welcome in Hong Kong.
Kevin and I thought about opening a store or restaurant, but those tend to go out of business quickly, and are almost impossible to get off the ground from a distance. If we were in town often enough to run a successful restaurant, we would not need to own a restaurant. We looked into investing in an existing business, but that would only help us if we were the majority owners. Eventually, we learned that owning land is just as good as owning a business, as long as Hong Kong gets their cut. But land in Hong Kong does not come cheap. The old adage “buy more land, they're not making any more” is not at all true in Hong Kong. They are literally creating more land out of the sea. But it is the opposite of cheap.
While Hong Kong may not stretch out very far, it rises up more than most cities. The vast majority live in either a private housing estate or public housing estate. Though every dwelling is generally called a house, almost everyone lives in apartments, many of which are in skyscrapers. Outside of the New Territories, there are few detached houses in Hong Kong. People who own their own houses mostly own apartments. Everyone else rents apartments. Someone else owns them. Kevin, Lily and I are now part of those someone else. We are officially landlords, or at least we will be as soon as we get some tenants. Lily did not have to participate, but as long as we were shopping, she wanted to join in. She stayed in Taiwan because the Qingming holiday only gave her a long weekend, and most of our business was conducted during the week.
Rather than do everything ourselves or go through an estate agent, we hired an estate solicitor. It cost more money upfront, but will probably save us a fortune in the long run. Not only is the solicitor supposed to know all the laws, rules, and regulations, but they have more experience than we do and they are physically in the country. Flying to Hong Kong every time something comes up would not be ideal.
One of the solicitor's first suggestions was that we buy multiple properties at the same time. We always knew we would have to own more than one apartment, but assumed that we would start with one and go from there. In Hong Kong, the stamp duty for first-time buyers is substantially lower than for everyone else. We were always going to get the discount rate with the first property, but got the low rate for everything since we turned in all the paperwork at the same time. We thought that was pretty clever, but apparently, most people do it this way. And just last year, the government lowered the minimum deposit rate for first-time buyers. The real estate market is not at its best right now and they want to motivate potential buyers. We figured we might as well take advantage of that. It is essentially a buyer's market. No one knows when that will change, but everyone knows that prices will skyrocket eventually.
Another useful suggestion was that we only buy apartments in private housing estates rather than independent buildings. Most estates are run by property management companies that handle rent, maintenance, security, and above all, paperwork. That means a small portion of the rent goes to the property management company, but doing all of that ourselves would be a pain in the butt even if we lived in the country. We will most definitely be hands-off landlords. Odds are, we will never meet any of our tenants.
Buying an apartment in a public housing estate is possible, but never really a good idea. It is a terrible investment since the government subsidizes public housing. There really are no opportunities for unscrupulous capitalists to gouge their tenants deeper into poverty. Becoming slumlords was never an option. Not only would we not want to, obviously, but people who rent in private estates tend to be middle class and more likely to go to the authorities when someone threatens their home.
Our solicitor also thought it would be a good idea if at least one of our new apartments was a first-hand property. In Hong Kong, that usually means a building that is still under construction. The downside to a new building is that no one can predict the future market or how many bugs have to be worked out of the system, while you can look at occupancy rates in an established building. The benefit is that Chinese people love everything new. Where we live, in Kaohsiung, new buildings are popping up like weeds. Apartments are staying empty for years because the supply outweighs the demand. In Hong Kong, new apartments are bought and sold before they are even built. Buying directly from the developer rather than an estate agent is supposedly easier, mostly because there is no middleman and fewer people who need to get paid.
Before we signed a single piece of paper, we had to ask ourselves if we could even afford to buy more than one apartment in Hong Kong. The answer, of course, was that we could not. Hong Kong is absurdly expensive, even in a buyer's market with tax breaks and government incentives. Fortunately, Hong Kong also has banks. Hong Kong, in fact, has many banks. I have no idea how many, but if Hong Kong is one of the world's financial capitals, there are probably more than a few. A bonus to getting a bank loan is that if any property developer screws us over, they are also screwing over the bank, which is partly owned by the government. In China, it is in your best interest to not steal money from the government.
Maybe I missed something the past few years in your blog, but how did you and your friends come up with enough money to buy all these apartments in HK? What it is that you do for money these days?
ReplyDeleteWhen you see all the figures spread out on paper, it is not especially remarkable. We make more money than we spend. We - mostly Lily & Kevin - are pretty good at saving money. I tend to spend more on travel, but much of the world has been closed lately. I have not left China/Taiwan since 2019.
ReplyDeleteKevin has the same office job he has had for over 10 years. Lily is currently unemployed, but made a pretty good living in her 20s. I have been a professional dancer and musician since before I was an adult. That's not nearly as steady as an office job, but for almost a year now I have been a resident choreographer at a performing arts center, which is practically a 9 to 5 gig.
As first-time buyers, we paid less in taxes, deposits, and fees than we ever will in possible future purchases. Hong Kong's economy was hit by a virus immediately following over a year of protests and government restrictions, all of which led to a buyer's market. We mostly bought into estates in less than developed neighborhoods, which is a gamble most people in our league are not willing to take. We also took out a bank loan. That helps.
Had we tried to do this two years ago, and maybe two years from now, it would have been impossible. We took advantage of the circumstances. Location gets all the attention in real estate, but timing is pretty important, too.