In Hong Kong, an immediate impulse for flat hunters can be to seek a property with an outdoor area.
And why not?
They are highly sought-after by potential tenants and result in potentially higher returns on investment for owners in the long term. But what are some of the pros and cons of this strategy?
The pros: You have a large space compared to the interior.
The views from a rooftop can also be highly appealing, and the space provides a sense of privacy as well, making them wonderful for entertaining.
The cons: Many roofs don’t have direct access and require entrance via a shared staircase.
Direct sunlight heats the floor tiles of the roof, which increases the temperature of your ceiling, making your flat comparatively hotter in the summer.
An important consideration is whether your flat will leak with heavy rain. With the combination of heat and rain, ask yourself if you will get commensurate use out of your investment?
The pros: Direct access is a plus and a balcony belongs solely to your flat.
The natural light available is particularly appealing; a bonus for the interior is natural ventilation during the summer months.
With a balcony accessible from the flat, it will get an ample amount of use.
The cons: It can be frustrating if you have a small balcony, which will likely not have enough room to entertain people.
A balcony seems intimate but it may not be very private at all, given that it protrudes from a flat and often faces other buildings and balconies in the same building.
The pros: Typically on the first residential floor, a terrace has direct private access making it very attractive.
A terrace cannot be underestimated as a space for entertaining and can often be the largest outdoor space of all the options.
Placing plants on a terrace allows for a more pleasant view from inside the flat, looking out on greenery rather than just a concrete jungle.
The cons: With the whole building overlooking the area, privacy is not guaranteed.
Neighbours may complain about any noise and terraces are frequently subject to rubbish thrown from above. They may also be prone to flooding in typhoon season, which could also affect your flat.
As terraces are frequently overshadowed by neighbouring developments, they can be dark and have sparing access to direct sunlight.
The Holy Grail: Reach for the skies
The “Holy Grail” for owners and tenants is the sky terrace. This differs from a first floor terrace in that it is higher up, combining the best features of a rooftop, terrace and balcony.
While often moderately sized when compared to first floor terraces, sky terraces are superior and rare in Hong Kong.
They have direct access but more privacy than balconies, rooftops and terraces, especially as they are often shielded by the curvature of a building.
With a larger area but better views than a terrace (without the negative points of a rooftop), sky terraces are the ultimate for entertaining — just say “yes”.
Should you take the plunge?
Outdoor spaces usually attract expatriates, making great investment sense with the level of market demand.
This is provided they are well maintained, free from flooding, and checked for other hazards. In terms of outdoor spaces, the balcony is the easiest because of its small size.
Yet, it is also common for the same reason — balconies don’t increase overall rental value much on the whole.
When investing, rooftops, terraces, and sky terraces are what you should aim for, with a couple of caveats.
Firstly, renovation costs may be higher, especially with waterproofing needs (this is no joke in Hong Kong, which is susceptible to both typhoons and dampness that can ruin walls/flooring).
If you have leakage issues, prepare for disputes with your neighbours that could lead to additional costs. Secondly, be prepared for a higher down payment on your mortgage, since banks mark outdoor space as having a lower value than the inside space.
You might bemoan higher costs upfront in renovation and financing, but your property will likely attract a larger rental premium and potentially higher capital gains in the long term.
Also, you may be able to lease your flat out faster, particularly in established or burgeoning expatriate districts, where demand for attractive outdoor space is higher.
A final word of warning — check for any illegal structures.
There have been many a tear shed over the “perfect” flat that has actually been modified outside of the law.
This could be an illegal outdoor extension, or more likely, an area which was originally outdoors has been converted into the interior
If you are found out, you will have to pay for demolition and lose that amount of square feet to boot.
Check with your agent and look at the original floor plans before purchase.
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