A home in Hong Kong

Following my own advice set out in the post Take advantage of Hong Kong, I purchased a semi-detached dwelling in Yuen Long, New Territories on 1 September 2009. The townhouse was completed in July 2009 but I am a second hand buyer (so unfortunately I must stamp duty whereas the first owner did not). I paid 0.99% higher than the first owner. It is a gated community and provides excellent security and new facilities like gym, gardens/parks, clubhouse and pool. The townhouse has a GFA > 2800 sqf. We elected 60 days for completion.

Transport Options

The MTR station is 1 km from the estate. There is a free private shuttle bus that runs to the MTR station and Tai Lam Tunnel bus intercharge from the estate every 30 minutes.

Alternatively can also catch two public buses, the KMB 54 and KMB 77K which stop in front of the estate on Kam Tin Road, which come every 5 - 10 minutes.

You can catch or you can drive to the MTR station (Park N Ride at the MTR station for HK$20 all day) or catch a taxi to the MTR station. It takes approximately 27 to 35 minutes by MTR to get to Central.

If you drive all the way, it will take 30 minutes to get to Central by taking the Route 3 highway. The two tolls add up to $75 one way.

Financials

Now the numbers ...

Purchase price: $7.5m

Stamp duty: $281,250

Agent's Commision: Nil

Solicitor's Fees: Nil

70% loan from bank: $5.25m

Interest rate: 2.1% for deposit-linked mortgage

Loan term: 40 years

Cash Rebate from Bank 1%: $52,500

Monthly repayment: $16,176 (interest component is $9,187.50)

Monthly management fee: $2,078

Fire insurance: Nil (estate has master policy)

Government rate: $534 (3% of rateable value)

Monthly expenses (not cashflow): Interest + Monthly management fee + Government rate

= $10,375.33 and dropping as interest component slowly reduces

In comparison, my current rent is $27,000 for GFA of only 982 sqf.

The property needs to appreciate by at least 2.36% per year over the next 4 years for me to live for free (i.e. cover the capital costs such as stamp duty, and ongoing costs such as interest and monthly management fees).

If the property appreciates by 17% in the next 4 years as expected by many analysts for the HK property market in general, then this equates to a 4% compound annual growth rate. The total cash used was $1,812,671.72 in the 4 years and the gross capital gain is $1,275,000. The compound annual growth rate of cash that has been used is 14.24% which is just a bit less than Warren Buffet's target of 15%.