Abacus | Are Hong Kong property prices, like its hamsters, in the eye of the Tiger?

To buy or to rent? It’s a fundamental question we all ask when we consider how to put a roof over our heads. I went through this process 40 years ago, early in my career and with a young family, and have seen some wild swings in interest rates and property prices since.

In 1986, three years into my finance career, I relocated to Tokyo as the Japanese stock market and property boom were going at full throttle. It was a time of easy money, speculation, and senseless punting on memberships for prestigious golf clubs that didn’t yet exist. Many young couples got on the property ladder and inner-city prices raced higher. In the early 1990s it stopped, the stock market tanked, loan defaults skyrocketed, and banks went bust. Thankfully I didn’t buy, even though mortgage rates were offered around at 5.2 per cent – a 1 per cent discount to bank borrowing rates. After nearly 20 years of property market stagnation, that 5.2 per cent mortgage became 0.52 per cent and central city prices reversed and have been on a 10-year tear.

I returned to the UK in 1988, newly married, and took out a mortgage at 9.25 per cent from the Bank of Ireland. By the time I escaped from the mortgage, and the UK, the rate was over 16 per cent. I was lucky to get out with my shirt. Friends were working alternate day and night shifts just to cover the mortgage, and when they sold, they lost 45 per cent of the property value. Today, property prices are high with interest rates low and you can obtain a 75 per cent mortgage kicking off at a 1.7 per cent interest rate.

In 1992 I moved to Hong Kong with my young family and opted to rent – it was just easier – but clearly I should have bought. Later, in 2009, as a refugee of the global financial crisis, I thought about buying as rates were being lowered. But I didn’t really like the prices in the Mid-Levels, which seemed expensive compared with London or Tokyo. “The market must come down,” I thought. Friends jumped in with both feet and doubled, or tripled, their money, and some have retired on their stash. Good for them! I missed out not expecting Hong Kong property to continually rise.