In Hong Kong, some people buy flats not because of expectations of price appreciation but as a hedge to reduce risks.
They are no different from investors who sell their stocks with handsome profits but still want to play the market.
Consider the experience of my friend who sold his three-bedroom apartment in Laguna City just six weeks ago and embarked on a flat-hunting adventure that ended yesterday. He told me his experience.
He thought of selling his property in Lam Tin, which he used to lease out, to be able to purchase a three-bedroom unit in an old but robust district of the city where he rents a unit for his family of five.
So he made an offer to the owner on the condition he could sell his Laguna City unit. He did, but the owner changed his mind about selling his property.
And so my friend embarked on a flat-hunting trip along MTR lines, a strategy that many a shrewd Hongkonger deployed and made them rich.
He set his eyes on Sai Ying Pun, and a decent two-bedroom unit at a 20-year-old development overlooking Victoria Harbour.
The price tag was about HK$7.5 million, but the seller would take the deposit on the condition that he could buy another flat.
It is so common these days that a property purchase is conditional upon the sale of another because of government restrictions on the purchase of more than one unit; one has to pay a 15 percent stamp duty unless the buyer changes his/her single residential property within six months from the date of completing the new transaction.
This government policy has killed the second-hand residential market, especially the luxury segment, as I understand, despite the seemingly booming property market.
Then my friend set his eyes on City Hub, a trendy apartment block in To Kwa Wan, where a part of the Shatin to Central Link is set to run starting next year.
The minimum price for the studio unit is HK$5 million, or about HK$16,000 per square foot. The project, developed by Chevalier International and the Urban Renewal Authority, attracted 3,000 registrations for the 84 units.
Seventy-one units were cleared yesterday. One of them was by my friend, who paid around HK$6 million for the unit.
He is happy because the latest URA offer is around HK$20,000, or the price per square foot that he paid.
More so, he is happy with the yield, which he expects to hit 3 percent. Studio units sell like hotcakes – the same is true with leases – because many people nowadays have opted to stay single (a decision which, of course, is due to skyrocketing property prices, among other considerations).
And for the whole exercise, my friend is able to cash out of a three-bedroom unit to buy a studio unit.
Not that he is particularly positive on the residential market, which is already sky high and the world’s most expensive, but because he needs to hedge in case the price keeps going up.
Based on estate agents’ data, it is very hard to lose money on a residential property along an MTR line.
And so the legend of the never-ending housing bubble goes on.
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