Real estate is hot everywhere in the world – but especially here in Asia! Today we have a contributor, Fredrik from Asia Property HQ to share some insights, take it away!
Buying property, at least in your 30’s or early 40’s, is expected. Even taken for granted. You need a place to live, and you want to get on the property ladder sooner rather than later.
But what If you’re priced out of the market, with no other place to go?
For many entrepreneurs based in Hong Kong or Shanghai, the prospect of buying property, becomes less likely by the day.
Don’t have a spare 2 million HKD on your bank account? Then you will not even get a mortgage from your local HSBC branch.
But, with plenty of booming ASEAN countries just two or three hours away, there are still plenty of interesting property investment options available – even for the moderately successful Entrepreneur.
In Hong Kong, even cash millionaires struggle to get on the property ladder
Hong Kong is only second to Monaco, when it comes to real estate prices. With an average square meter price of HK$124,700, and a deposit requirement of 40% – even the average E-commerce millionaire might struggle to find a decent place in Sham Shui Po.
But how much more can real estate prices keep climbing?
Given that the salaries in Hong Kong are, in relative terms, fairly low, it would be reasonable if real estate prices reflected local spending power.
Financial centers are different, in the sense that they attract enormous wealth from overseas. Or, in the case of Hong Kong, from the rest of China.
As such, asset prices are not entirely dependant on local spending power, resulting in real estate prices that go far beyond what locals can afford.
So, don’t hold your breath for Hong Kong becoming less unaffordable.
After all, there are only so many places in Asia, where your money and business is safe.
So, what do you do if you don’t want to live in a shared flat in Mongkok until you’re 45? Well, I will get to that in a bit.
Yet, Asia based entrepreneurs are left with few options to set up their businesses
As said, there are good reasons for Hong Kong asset prices climbing as fast as they are.
I mean, where else should you base your business?
Thailand? Sure. It will only cost you 50,000 USD to get setup, and you’ll own 49% of the shares once you’re done.
Indonesia?
Vietnam?
Probably not.
There are only so many international cities, with sound legal systems, in Asia. Namely, Hong Kong and Singapore.
Your money is safe there. Things work. You don’t get shut down and deported for no good reason.
It doesn’t matter how many ports or glass skyscrapers are being built around Asia. At the end of the day, you can’t run a business if you have to spend most of your time cutting through dense red tape – rather than building a business.
It will take decades (if ever) until any city or country in Asia can seriously compete with Hong Kong and Singapore, so leaving is simply not on the table.
And to be honest, office rent and local employees are not that expensive in Hong Kong. I find them to be quite reasonable, apart from when it comes to buying real estate (and the prohibitive deposit requirements).
Why you should keep your company in Hong Kong, but consider other Asian countries for property investment
So, either you’re staying in that flatshare until retirement, or you better pack your bags and base your business in a country where you pay 50% tax and can get shut down for violating some obscure law.
Or, maybe, there’s another way?
What if you can combine the best of both worlds?
And this brings us to what this article is really about. The option of keeping your business in Hong Kong, and staying as a tax resident – while investing in real estate in other countries.
Now, before we get started, I want to make clear that investing in developing Asian countries is as risky as it sounds – but risk comes with opportunities.
As Entrepreneurs, we are good at taking calculated risks, and investing in property in Vietnam and Cambodia, might be a lot better than not investing at all.
While it’s true that it can be hard to take out a mortgage for overseas property investment (especially in developing countries), you can get quite far with one or two hundred thousand USD.
The market is also opening up, with Vietnam allowing foreigners to buy property as late as 2015.
In Thailand, foreign land ownership is restricted, but not when it comes to condos.
ASEAN countries also offer plenty of visa options, with a few examples below:
a. Thailand: 5 Year Elite Visas
b. Cambodia: 12 Months Business Visa
c. Vietnam: 6 – 12 Months Business Visa
d. Malaysia: 3 Months Visa Free (Per Entry)
Or, you can, as a Hong Kong resident, get an APEC card that gives you 3 months visa free stay, per entry.
In short, there are plenty of ways to stay 6 months (or more) each year – while running your Hong Kong or Singapore based business remotely.
Notice: Be careful about leaving Hong Kong for extended durations, if you are on a work or investment visa. Immigration grants visas only to genuine residents. Hence, staying outside of Hong Kong for 6 months (or longer) per year, may not be an option at this point.
What kind of risks do I have to deal with when buying property in Asia?
When you buy property in, say, the US or UK, you can be fairly sure that your investment will appreciate in value – and that you can find tenants that pay rent.
This cannot be taken for granted in, for example, Bangkok and other cities where foreigners are scooping large numbers of newly built condos.
Yes, Asia is growing fast. Not as fast as before, but it’s still growing.
Most likely, it will keep growing for decades.
But that must not necessarily translate into ever increasing real estate prices.
As I write this, I am sitting in the On Nut area of Bangkok.
New residential skyscrapers are being built everywhere, and Bangkok is not running out of land.
It’s fair to assume that they will keep building for many years to come. If anything, this does not bode well for those who hoped to see their property double in value over the next five years.
In fact, you might even find it hard to sell your ‘second hand’ apartment, when new buyers can buy a brand new unit for the same price.
I even hear of people, who did buy property in a nearby compound, telling me that they end up paying more in monthly maintenance fees – than it would cost them to rent the same place.
But, at least you can make a buck off AirBNB rentals?
Oh, apparently that was banned in 2016.
So, why even bother?
Because there are great property investments out there. You just need to use some good old common sense, and choose your investments based on the fundamentals that matter.
A few good examples follow below:
a. Transportation: Is the apartment located right next to a subway station or skytrain? Land right next to public transportation will always be scarce.
In Bangkok, for example, compounds right next to a Skytrain station have very high occupation rates, while buildings a few hundred meters away are left half empty.
b. Universities: Students need places to stay. University areas also tend to attract other businesses. Thus, supporting the local property market.
c. Foreign Ownership: Are foreigners allowed to own land, or at least apartments? If you need to set up three BVI holding companies, get a nominal director and written approval from the prime minister – you might want to consider easier options.
If it’s hard for you to buy now, so will it be for that other investor that might be interested in buying your condo a few years down the line.
d. The Local Economy: Do people have jobs? Is the country as a whole growing? Can locals afford to buy or are they priced out of the market?
The property market cannot only be supported by foreign buyers. Not even when investors from China are included.
Do you want to learn more about buying in Asia?
As I explained in this post, not everything is what it seems when it comes to Asian property investments. While things are moving fast, the dynamics are very different from the west.
Yet, property in various ASEAN countries is more accessible, compared to Hong Kong – which may not ever be a realistic option for many of us.
Please visit our website, AsiaPropertyHQ.com, for free country guides, where you can learn how to identify the right property for your budget, get a mortgage and much more.
