Ming Wei Real Estate Investments

Hong Kong is a huge beneficiary of China's rapid growth. It is a joke in China that increasingly "One country two systems" is giving way to "One country, one system and that system is the Hong Kong system". Market capitalism as practiced in Hong Kong has been both hugely successful and hugely influential in China. The respect that the Common Law based HK system gives to economic freedom - the untrammelled right to buy, sell and produce - has made it a very attractive place for multinationals to establish their base in Asia, and for foreigners to invest in real estate.

The principle advantage that Hong Kong has over the mainland is the ease with with non-residents can obtain finance for purchase of investment property. This makes the equity required to purchase an apartment in HK, especially for a locally-based investor, hardly more than that required to buy on the mainland, in spite of the near ten-fold difference in price. Of course the higher gearing comes with greater risk, both downside and (more importantly in the psychology of the property bull) upside.

The current market turmoil is definitely depressing prices in HK, but, because the HK dollar is pegged to the US dollar, the deep cuts in short term interest rates is likely to support prices. Funding rates of less than four percent are in prospect. The combination of this with very limited amounts of new development, especially on Hong Kong island is, in my view, likely to produce very good returns in the next five to ten years. Yields are very healthy - around five to six percent, with some places generating a yield of eight percent. To me these figures are a strong 'buy' signal.

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