Property investment advice

[SHERMEN]

Dear all, I hope to buy a flat for own use . However I found that nowaday price is too high. It seems keep rising. It seems i don't buy now. I can't buy in the future. Can you share if for own use , will you buy now ?

[wtbhotia]

It seems i don't buy now. I can't buy in the future.

Why cant you buy it in the future, is it because you think that it will keep rising and never go down

[Drunken Master]

I won't buy now.

[SHERMEN]

Yes, it seems keep rising, and my salary increment each year is so less. Seems interest rate is hard to increase. What do you think ?

[ArKay]

I bought at the end of last year with a very small budget. I nearly gave up because it seemed impossible, but the advice I got, which I took and am glad I did, was there was no point in waiting and trying to save more because, like you say, your salary increases won't cover any potential increases in property prices and meanwhile you've wasted another year or two's money on rent. So, I bought a place that's not quite my dream 'forever flat' (altho I love it despite that!), but it meant I now have very affordable mortgage payments, the large part of which is capital payment and the valuation of my flat has increased since I bought it. So now I'm on the property ladder, in a few years time if I decide to move into a bigger place, I'll be in a much better position financially to be able to do that.

Lots of people think prices will fall again soon, but if you're buying a place to live in and can't foresee that you'll ever have to sell it in a hurry then a fall in prices won't matter.

And, do you know that you can get up to 95% mortgages? If you've researched buying then I'm sure you already know this, but I thought I'd mention it because a lot of my friends (locals included) weren't aware anything above 70% was possible.

[gilleshk]

Money is not wasted on rent unless you make it that way. If the bank will give you a high percentage mortgage, you are "wasting" just as much and sometimes more money on interest.

The Hong Kong market is cyclical and it goes up and down quite a bit. The people that bought at the height of the market in '97 are about at the same level as now.

You obviously have some money for a down payment, you could invest that money and it would likely keep pace with the property market.

Personally, I've given up on real estate and prefer equities, it's much more flexible and the returns are more consistent over a long period of time. The money I make more than covers the rent I pay and it allows me to move around as much as I want.

However, if you are thinking long term and you have enough money for a decent downpayment on a place you see yourself living for a while then it really doesn't matter what the market is doing. Even if it fell 50%, as long as you can keep paying your mortgage and you are happy in your home, it has no bearing until you need to sell.

So, my personal view is that if you are buying for your happiness, long term and to have a home then go for it because it may not come down for a while. If you are buying as a somewhat short term investment, a place you don't necessarily love and you hope to make money, then you better wait and look at other investment vehicles.

[ArKay]

Money is not wasted on rent unless you make it that way. If the bank will give you a high percentage mortgage, you are "wasting" just as much and sometimes more money on interest.

Not necessarily true. My monthly rent was 9 times what my current monthly interest payment is. And that's with a 95% mortgage.

So, my personal view is that if you are buying for your happiness, long term and to have a home then go for it because it may not come down for a while. If you are buying as a somewhat short term investment, a place you don't necessarily love and you hope to make money, then you better wait and look at other investment vehicles.

Seconded.

[ssss]

I thought 95% mortgage was possible only for new buildings??

[ArKay]

I thought 95% mortgage was possible only for new buildings??

No. Building age and mortgage term can total up to 50 years. Anything over that and HKMC may still consider it but on an individual property basis. My building's 26 years old.

[Geoff]

So now I'm on the property ladder, in a few years time if I decide to move into a bigger place, I'll be in a much better position financially to be able to do that.

Surprised nobody has picked up on this obvious error - you may be in a much better position but you may be in a much worse situation. If property prices plunge you could be left in negative equity and unable to move, owing more on your mortgage than your property is worth.