Sheung Wan, Sai Wan- Countdown Neighborhoods…

Question: What if you want to invest in property-mad (and low tax) Hong Kong but don’t have the requisite millions to buy a flat on the Peak?

Answer: You can buy a small flat in Sheung Wan or Sai Wan for under 2million HKD (about 250K USD) and with low mortgage rates realize a positive flow of about 3% per annum. Hire a property manager and you still realize around 2.5%.

And that’s not counting the equity increase. How much? My friend, a local agent, who has been there for years, says prices should double in anywhere from two to six years, bringing your total per annum to- well, you do the math.

I have seen the future of investment in Hong Kong and it’s name is Sheung Wan. Or Sai Wan. Or even Pokfulam, even though that has already “arrived” to an extent.

On a recent rainy Friday (doesn’t narrow it down much in typhoon season) I trudged through the down and out but thoroughly fascinating districts of Sheung Wan/Sai Wan and saw why they could be the hottest neighborhoods in Hong Kong, albeit two of the cheapest.

Here are the genuine old neighborhoods of Hong Kong. And easy to reach; just walk west from the fashionable Midlevels on Hollywood Road and watch the skyscrapers and boutique coffee shops (how many ways are there to brew a cuppa??) morph into antique shops and galleries, and finally, around a bend, a coffin maker with his wares stacked at the door.

Or leave business crazed Central on Queen’s Road and follow it down Queen’s Road West, where local stores hawk fruit, noodles, dried medicinal plants, etc. You will come to the Row of the Deceased, a series of stores filled with small paper miniatures (planes, cars, money), all wrapped carefully and hung from the ceiling. These will be burnt and offered to ancestors. Fragrant incense shops.

More and more young people spill over from Central and Midlevels where you generally pay 10,000HKD per square foot (depending on which of the many ways it’s measured, of course) or more to purchase a flat. Here in Sheung Wan, most flats I saw were for ordinary mortals, slower elevators, walkups, no pool, no gym, but for about $5K per sf. Many students, teachers and young professionals are getting decent digs with good views without a banker’s housing allowance.

Not a secret, but something to remember: another MTR (HK’s subway system) line has been proposed for the Western Island area and would run from Sheung Wan station to Kennedy Town with a stop at HKU and Sai Ying Pun. This would literally explode these neighborhoods. Now commuters tend to take taxis or the tram, since walking to the single station in Sheung Wan could take as long as the bus ride.

In addition, an escalator and two lifts are being proposed for this area, in addition to improving walkways.

If you want to invest here but don’t want to own a flat and deal with tenants and plumbing, there are property funds where you buy in for a certain amount and own a pro rata share. Pay out is according to your percentage of the whole.

Either way, the small local areas west of Central will not be Little Brothers forever. But for now, anyone who enjoys local flavor and lower rents, or wants to invest in a countdown neighborhood, I recommend Sheung Wan and Sai Wan.

Safe investing!

Bob Diefendorf is a professional real estate agent based in Hong Kong and can be reached at - Bob Diefendorf