To rent or buy? That is a good question.

Real estate in Hong Kong is not cheap. In fact, some may say that it is the most expensive in the world. The cost of living is not only high. Buying and renting a house in Hong Kong will cost you a lot of money.

This is why the Hong Kong Housing Authority introduced a lot of schemes to help increase home ownership in the region. They have the Home Ownership Scheme, Tenants Purchase Scheme, Home Assistance Loan Scheme, and Home Purchase Loan Scheme. All of these are meant to make home ownership affordable for those living in this region.

Does that mean you should opt to buy a house? It is not as easy as that. There are several factors to consider before you make a final decision.

Home Ownership in Hong Kong: Should You Buy or Rent?

Factors to consider when deciding if you should buy or rent in Hong Kong

There are 4 important factors that will define the best course for you – whether you should be a homeowner or a tenant.

The housing market conditions.

Start by looking at the housing market. Is it a good time to buy? Read the papers and find out the latest news about buying and renting in Hong Kong. How high are the rental rates in your location? Is it going up and do you think the owner of your rental house will raise their rates? If you will buy, how much is the mortgage interest rate? You are most likely going to need a mortgage to afford the expensive homes in Hong Kong. Find out if this is something that you can afford.

The location.

The next consideration that will help you decide if you will rent or buy a house is the location. According to an article published on Forbes.com, 7 out of 10 Hong Kong residents feel like the living conditions in the city is getting worse. If you feel the same way, do you really think it is a wise move to invest in a property here? While it is depressing news to read, it does not make Hong Kong an awful place to live. Sometimes, the conditions are just not right because of present circumstances. Although the government is doing everything to improve life in this region, it will take some time. If you think that you are willing to wait for that to happen because you love to live in Hong Kong, then, by all means, buy a house. But if you feel like you cannot see yourself living where you are, then continue renting.

Your current lifestyle.

Another factor that will affect your decision to rent or buy is your lifestyle. Are you planning to get married or have children? That is a sign that you are ready to lead a stable life. It is time for you to look for a place where you can raise your family in peace. It should be near the schools, establishments, and various amenities that you will need to survive. Your home should complement your lifestyle needs. Once you find that place, you can think about settling down and buying a house. But if you know that your life will still go through major changes, renting is the best arrangement for you.

Your future goals.

Finally, you want to make sure you will consider your future goals. Do you have plans of living your entire life here in Hong Kong? Investing in a home is the best way to secure your place in the region. But if you see yourself living in a different region, city, or country, then continue to rent.

Be honest about your analysis when you are considering all of these so you can really determine if you are ready for home ownership or not.

Financial considerations before buying a house in Hong Kong

In case you have decided to buy a house, there are 3 financial considerations that you need to look into.

  • Your deposit.

Start by asking yourself about your deposit. How much have you saved? The ideal deposit is 30% of the value of the property. The Hong Kong Monetary Authority encourages banks to follow a 70% loan-to-value (LTV) ratio. If you want to buy an HK$5 million home, you need at least HK$1.5 million saved in your deposit. While there are banks who accept a 95% LTV ratio, that will cost you more in the long run. So make sure you have as much deposit as you can save to make the cost as low as possible.

  • Your income.

Obviously, your income is also part of the picture. You need to prove to the bank that you can afford to pay back your loan. That means you should have a stable employment condition with a high enough income to pay your mortgage.

  • Your emergency fund.

Finally, you have to check your emergency fund. This is a separate savings amount from your deposit. Remember, you will have a lot of costs to meet. You need to pay the closing cost, stamp duty, and professional fees. All of these will add up and your emergency fund will help you pay for these. Not only that, it will help you cover the costs to complete the home buying process.

Your financial situation is also a factor to consider when deciding to rent or buy in Hong Kong. Even if you are emotional, mentally, and physically ready to buy a home, you still have to rely on your finances to make the final decision if you can be a homeowner or not.

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Abigail Wong is the Writer of The New Savvy.

She is a Singapore Management University 2nd year undergraduate specialising in Strategic Management. From Tampa, Florida, she possesses an International Baccalaureate diploma from C. Leon King High School, and previously held the position of Treasurer of the King High School Division of the French National Honour Society and the Science National Honour Society. Abigail is currently acting as President of the French Cultural Club for SMU International Connections, and as a Resident Advisor and Fire Warden for the SMU Residences at Prinsep.

Abigail is a Former Florida Science Olympiad Champion in chemical forensics and protein modelling, and former Health Occupation Student’s Association District Champion in clinical nursing.

In her free time, Abigail enjoys interacting and caring for animals. She has previously volunteered for the Humane Society of Tampa Bay as an Adoption Assistant.

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