Choosing each apartment was a different experience. The Hung Hom estate has been open for six years, so we inspected the apartment, toured the grounds, talked to a couple of neighbors, and did everything you would do when renting or buying an apartment.
The Ma On Shan estate is not open yet, but is mostly built. We could enter the apartment, but it was unfinished, as were the landscaping and swimming pool. Since it is incomplete, they had show flats in Tsim Sha Tsui. Obviously, inspecting a show flat would be pointless, but we will be able to inspect the actual apartment once it is complete. We already bought it, but there are legal provisions in place if what we bought does not turn out to be what we get.
The Kai Tak estate is currently a construction site. We could not even set foot on the property. They also had show flats, as well as 3D models and a lot of artist's renderings. Buying an apartment that has not yet been built takes some imagination, but again, if they cannot deliver, we get our money back plus a little extra for our trouble. Some of the richest people in Hong Kong, including politicians, like to buy into new developments. They would never stand for getting robbed, and even though they spend far more than we did, the laws protect all of us.
We have six months from completion date until final inspection date, so Ma On Shan and Kai Tak are going to require two separate trips to Hong Kong. Fortunately, Hong Kong has to let us in no matter which direction the viral winds blow. The only problem is Taiwan. They never have to let us back in, though they most likely would. As long as Hong Kong does not go American, we should be OK.
The developers for the Ma On Shan and Kai Tak estates gave us books full of information on not only our apartment, but every other apartment on site. If, for some strange reason, I want to know the induction hob's brand and model number in Tower 3, 15F, unit D, I could. Even though our apartment is a different floor plan on a different floor of a different tower.
It is a Miele KM6115. I looked it up.
Since we bought the Hung Hom apartment from an estate agent rather than the developer, we only got information on our specific unit and the general estate. We know next to nothing about the other apartments, and since they are several years old, no one else does either. Until the owner puts it on the market.
Legally, the rights and responsibilities of landlords in Hong Kong are more or less the same as the United States. We have to provide a livable space and fix anything that breaks down enough to endanger that. Tenants are responsible for minor cosmetic issues. We can't evict them without cause, which are mostly common sense issues, and they have to pay rent on time. Everyone can haggle and negotiate for whatever they want in the beginning, but once a lease is signed, that is where the authorities look in the event of a disagreement.
Something different is the way Hong Kong handles utilities. Where I come from, they don't turn on the apartment's gas and electricity until you move in and pay the gas and electric company. Here, the electricity is always on. If the apartment is empty, you can turn off the breakers, but the electric company is always supplying juice. That means the owner has to pay the electric bill until someone moves in and takes over. Fortunately, utility bills, in my experience, are far cheaper in China than in Minnesota, mostly because of heat in winter and probably more than a little political bullshit. The water bills in both countries are practically nothing, but ironically, the Ma On Shan water price is slightly more than Kai Tak or Hung Hom, even though Ma On Shan is right next to one of the largest reservoirs.
One thing we will never have to deal with as owners is furniture. Since these are all family apartments, they will come unfurnished. Most families have their own furniture, and even if they do not, they all have their own tastes. The property management company at Hung Hom has a furniture package that renters can choose, but that has nothing to do with us.
How much to charge for rent was an interesting issue. When you look at websites advertising apartments for rent, you see essentially the same apartment at wildly different prices. As it turns out, the property management companies look it up on their spreadsheets and pick the highest number they can find. My first apartment in Hong Kong was in an independent building. I think that owner just picked the price out of a hat. When we were given a price range for comparable units in the Hung Hom estate, we told the property manager to go with the lowest number. That might have been the first time anyone told him to aim low.
Our goal is not to make a profit from rent. That is pretty much impossible. If you buy a ten million dollar apartment and charge $30,000 a month in rent, it would take 30 years to break even. Maybe if you own the entire building, you can make some money off rent, but independent buildings around here tend to have lower rents and the more expensive buildings are in estates that almost no single person could own. And only one of our apartments is ready for tenants. It will be more than a year before the Kai Tak apartment is habitable. Even if the property manager finds someone to move in on the first available day, that is still one year of no income whatsoever. The profit only comes from selling the apartment at the right time. The trick is finding the right time. Everyone assumes the Kai Tak estate will be worth far more after the neighborhood is fully developed, but it is still gambling. The Ma On Shan apartment is almost sure to increase in value, but there is no way to know if the neighborhood will ever become popular. The surest thing is Hung Hom, but since we did not get in on the ground floor, we will never make as much money from that one as we potentially could from the others.
Not that it really matters. We would like to make a few dollars eventually, but we did this to have a financial stake in Hong Kong. We are never going to get rich from any of these properties. To make any real money, we would have to sell them at the right time, buy something else at the right time, and then sell that at the next right time, repeating as necessary. For now, we have reached our goal. As long as we do not lose everything, I am satisfied.
Friday, April 9, 2021
Wednesday, April 7, 2021
Lord Of the Land part 2
Kevin, Lily and I, and the bank, now own three apartments in Hong Kong.
Apartment #1 is in Hung Hom, near the Whampoa shopping boat. It was built in 2015 and is up and running, ready for someone to move in. The property management company is already advertising. It is a 3 bedroom/2 bath with a large kitchen, by Hong Kong standards, tiny bedrooms, an open rectangle of a living room/dining room, and outstanding views of Kowloon Bay from the living room and all bedrooms. Since it faces east and has larger than average windows, there is plenty of natural light in the morning, except in the kitchen. No one can possibly build anything between the apartment and the bay, so that view will never be obstructed. Unfortunately, the only balconies are off the laundry room and kitchen, which face inward, toward the neighbor's apartment. Most of the newer buildings are designed that way, so no one can see everyone's laundry from the street. It makes the building look better, which probably increases the property value, so I have no complaints.
This is the largest estate we bought into, with over 4,000 units in two dozen towers. That might seem large, but it pales next to Hung Hom's largest estate, which has over 10,000 units in 88 towers. That was actually my first choice, mostly because I like the neighborhood, but the only apartments available were studios the size of closets and tiny one bedrooms. We knew it had to be at least 3 bedrooms to have any resale value. Instead, we went newer and smaller. As a private housing estate, it has all the usual courtyard/landscaping with water features, indoor playground, clubhouse, gym, a few outdoor swimming pools, underground parking for cars/scooters/bicycles and even visitors. There are a few restaurants and shopping on site, but since this is Hung Hom, the entire estate is surrounded by shopping and food. It is an easy walk to the Whampoa or Ho Man Tin MTR stations, and as a larger estate, there are usually taxis waiting on the main road. It is close to Route 5 and Route 1, which is both convenient for drivers and inconvenient because of the horrendous traffic. They are building a new highway to alleviate some of Route 5's congestion, but it will not connect to the Cross-Harbour Tunnel. I have absolutely no idea about area schools and grocery stores, but the property management company does. I know about a ParknShop maybe a kilometer away, but there is probably something closer.
Apartment #2 is in Ma On Shan, surrounded by several country parks. It is in a brand new estate and will be ready for tenants in a few months. Several apartments were available, but we went with a 4 bedroom/3 bath with a small but nice kitchen, small bedrooms, large living room/dining room, and great views of Plover Cove. Since it faces west, the sunset over the mountains should be beautiful. The living room balcony looks like a great place to sit with a drink and enjoy the view. It is physically possible for someone to build something between the apartment and the view, but that would be a major construction project that takes years. As with the Hung Hom apartment, the laundry balcony faces the neighbors, but this kitchen has an outward window facing east.
This is the smallest estate we bought into, with 500 units in four towers and a few “houses” that are a block of 3 and 4 story apartments. It has less landscaping than the Hung Hom estate and fewer common areas, but they put in a couple of “Italian” water fountains. I have only been to Italy once, so I am far from an expert, but these fountains do not look like what I saw in Rome. There is a covered outdoor playground, clubhouse, a small but nice gym, a curved outdoor swimming pool, a smaller rooftop pool, and ample underground parking. Ma On Shan is in the New Territories and nowhere near Central, but it is one of those up and coming neighborhoods that developers hope will attract people who want to get away from the crowds. With any luck, rich people will move in and drive up the prices. I would not be at all surprised if this apartment brings the most profit after we eventually sell them. It is still in Hong Kong, so there are at least two shopping centers within 2 kilometers, one of which is connected to the nearest MTR station. The estate is close to two beaches, which is not a selling point in Chinese, for some reason.
Apartment #3 is in Kai Tak, near the old airport/now cruise terminal and about 3 kilometers from the Hung Hom apartment. The estate is still under construction and scheduled to open next year, with Phase 1 opening a few months before Phase 2. It is so new that Phase 3 has yet to be announced. Though it does not currently exist, our unit will be a 4 bedroom/3 bath with a nice kitchen, two small bedrooms and two master bedrooms, and a living room/dining room larger than all of the bedrooms combined. One of the master bedrooms will have an unusually large closet and the other will have an unusually large bathroom. Every bathroom will have a bathtub, unlike most Hong Kong apartments. The living room and all bedrooms will face south toward Kowloon Bay, though the view will probably not be nearly as good as the Hung Hom apartment. The master bedroom with the large bathroom will have both south and east facing windows, so that room should get plenty of natural light. The kitchen window will face west and might possibly have views of Symphony of Lights in Victoria Harbour. Maybe.
Phase 1 will have 350 units in two towers and four “houses”. Phase 2, with our apartment, will have 250 units in two towers. Since the old airport height restrictions no longer exist, every new development in the area is going for tall over wide. This is easily our highest apartment, by ten floors. By next year, the estate will have several gardens and water features, an indoor playground/clubhouse, a larger gym than the others, a large outdoor swimming pool with smaller children's pool and jacuzzi, and plenty of parking. Kowloon Walled City Park is a kilometer away to the northwest, Kwun Tong Promenade and the new cruise terminal are 2 kilometers to the southeast, and the Hung Hom Promenade is a little over 2 kilometers to the southwest. Kai Tak and Kowloon Bay are the closest MTR stations. This estate is also near Route 5, but farther away from the Cross-Harbour Tunnel. Kai Tak is largely under construction, but everyone assumes that it will be full of shopping and food just like every other developed inch of Hong Kong. If future trends are anything like current trends, it will mostly be higher end yuppie shopping, which I think has far less character, but is much better for property values.
Apartment #1 is in Hung Hom, near the Whampoa shopping boat. It was built in 2015 and is up and running, ready for someone to move in. The property management company is already advertising. It is a 3 bedroom/2 bath with a large kitchen, by Hong Kong standards, tiny bedrooms, an open rectangle of a living room/dining room, and outstanding views of Kowloon Bay from the living room and all bedrooms. Since it faces east and has larger than average windows, there is plenty of natural light in the morning, except in the kitchen. No one can possibly build anything between the apartment and the bay, so that view will never be obstructed. Unfortunately, the only balconies are off the laundry room and kitchen, which face inward, toward the neighbor's apartment. Most of the newer buildings are designed that way, so no one can see everyone's laundry from the street. It makes the building look better, which probably increases the property value, so I have no complaints.
This is the largest estate we bought into, with over 4,000 units in two dozen towers. That might seem large, but it pales next to Hung Hom's largest estate, which has over 10,000 units in 88 towers. That was actually my first choice, mostly because I like the neighborhood, but the only apartments available were studios the size of closets and tiny one bedrooms. We knew it had to be at least 3 bedrooms to have any resale value. Instead, we went newer and smaller. As a private housing estate, it has all the usual courtyard/landscaping with water features, indoor playground, clubhouse, gym, a few outdoor swimming pools, underground parking for cars/scooters/bicycles and even visitors. There are a few restaurants and shopping on site, but since this is Hung Hom, the entire estate is surrounded by shopping and food. It is an easy walk to the Whampoa or Ho Man Tin MTR stations, and as a larger estate, there are usually taxis waiting on the main road. It is close to Route 5 and Route 1, which is both convenient for drivers and inconvenient because of the horrendous traffic. They are building a new highway to alleviate some of Route 5's congestion, but it will not connect to the Cross-Harbour Tunnel. I have absolutely no idea about area schools and grocery stores, but the property management company does. I know about a ParknShop maybe a kilometer away, but there is probably something closer.
Apartment #2 is in Ma On Shan, surrounded by several country parks. It is in a brand new estate and will be ready for tenants in a few months. Several apartments were available, but we went with a 4 bedroom/3 bath with a small but nice kitchen, small bedrooms, large living room/dining room, and great views of Plover Cove. Since it faces west, the sunset over the mountains should be beautiful. The living room balcony looks like a great place to sit with a drink and enjoy the view. It is physically possible for someone to build something between the apartment and the view, but that would be a major construction project that takes years. As with the Hung Hom apartment, the laundry balcony faces the neighbors, but this kitchen has an outward window facing east.
This is the smallest estate we bought into, with 500 units in four towers and a few “houses” that are a block of 3 and 4 story apartments. It has less landscaping than the Hung Hom estate and fewer common areas, but they put in a couple of “Italian” water fountains. I have only been to Italy once, so I am far from an expert, but these fountains do not look like what I saw in Rome. There is a covered outdoor playground, clubhouse, a small but nice gym, a curved outdoor swimming pool, a smaller rooftop pool, and ample underground parking. Ma On Shan is in the New Territories and nowhere near Central, but it is one of those up and coming neighborhoods that developers hope will attract people who want to get away from the crowds. With any luck, rich people will move in and drive up the prices. I would not be at all surprised if this apartment brings the most profit after we eventually sell them. It is still in Hong Kong, so there are at least two shopping centers within 2 kilometers, one of which is connected to the nearest MTR station. The estate is close to two beaches, which is not a selling point in Chinese, for some reason.
Apartment #3 is in Kai Tak, near the old airport/now cruise terminal and about 3 kilometers from the Hung Hom apartment. The estate is still under construction and scheduled to open next year, with Phase 1 opening a few months before Phase 2. It is so new that Phase 3 has yet to be announced. Though it does not currently exist, our unit will be a 4 bedroom/3 bath with a nice kitchen, two small bedrooms and two master bedrooms, and a living room/dining room larger than all of the bedrooms combined. One of the master bedrooms will have an unusually large closet and the other will have an unusually large bathroom. Every bathroom will have a bathtub, unlike most Hong Kong apartments. The living room and all bedrooms will face south toward Kowloon Bay, though the view will probably not be nearly as good as the Hung Hom apartment. The master bedroom with the large bathroom will have both south and east facing windows, so that room should get plenty of natural light. The kitchen window will face west and might possibly have views of Symphony of Lights in Victoria Harbour. Maybe.
Phase 1 will have 350 units in two towers and four “houses”. Phase 2, with our apartment, will have 250 units in two towers. Since the old airport height restrictions no longer exist, every new development in the area is going for tall over wide. This is easily our highest apartment, by ten floors. By next year, the estate will have several gardens and water features, an indoor playground/clubhouse, a larger gym than the others, a large outdoor swimming pool with smaller children's pool and jacuzzi, and plenty of parking. Kowloon Walled City Park is a kilometer away to the northwest, Kwun Tong Promenade and the new cruise terminal are 2 kilometers to the southeast, and the Hung Hom Promenade is a little over 2 kilometers to the southwest. Kai Tak and Kowloon Bay are the closest MTR stations. This estate is also near Route 5, but farther away from the Cross-Harbour Tunnel. Kai Tak is largely under construction, but everyone assumes that it will be full of shopping and food just like every other developed inch of Hong Kong. If future trends are anything like current trends, it will mostly be higher end yuppie shopping, which I think has far less character, but is much better for property values.
Monday, April 5, 2021
Lord Of the Land part 1
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.
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.
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