Hong Kong announces new measures to attract business
Hong Kong has announced a US$3.8 billion package to attract businesses back to the city, the Financial Times reported in October. Visa and tax concessions will be made available for skilled expat workers, and there are initiatives to make it easier for long-term expat residents to buy a home. Expats who have resided in Hong Kong for seven years may be eligible for a refund on the stamp duty they paid on their first home.
A two-year ’top talent’ permit will also be made available for those earning an annual salary of HK$2.5 million and for graduates who have a qualification from a university listed as one of the top 100 universities in the world. Those eligible for the permit can work in Hong Kong even if they have not obtained a job offer – a relaxation of the current requirements. Funds to attract developing industries, such as fintech, data science, health tech and artificial intelligence will also be ramped up. Exchange operator Hong Kong Exchanges and Clearing will be permitted to revise its listing requirements to attract equity fundraising by tech companies. However, local traders have expressed doubts that this will boost the currently moribund stock exchange.
The measures are perceived as necessary due to the recent lengthy lockdowns, which have adversely affected the local economy, and also due to security crackdowns, which have made international firms jittery about the political stability of the region.
Expats in Thailand to face tax shake up
In 2014, the UK government attempted to bring in measures to penalize British expats overseas by abolishing their right to a tax-free personal allowance; an allowance which is granted to all taxpayers in the UK. Although this policy was never implemented, there are fears, according to the Thai newspaper Pattaya Times, that this measure could resurface. If it does, the paper warns that British nationals in Thailand could be £2,500 per year worse off. Financial experts (the Pattaya Times quotes Scottish financiers Forth Capital as an example) predict that many British expats would have to consider returning home to safeguard their finances, if this measure came into force.
Rental costs in Singapore ‘highest in a decade’
Bloomberg reports this month that the costs of rental accommodation in Singapore have reached their ‘highest in a decade,’ causing the city state to compete adversely with Hong Kong, where rents have fallen by 2.1%. Hong Kong is an outlier among the world’s cities, according to Bloomberg. Most of the major urban areas across the globe are suffering from rising rents and squeezed mortgage payments, as interest rate hikes begin to bite.
Rents in Singapore increased by 31% in September, but perhaps comparisons are invidious, since Hong Kong remains the world’s costliest city when it comes to rents, with apartments leasing at between $5,600 and $7,500 per month. Property experts Knight Frank say that they expect much of the rental demand in Singapore to come from expats relocating from Hong Kong. Bloomberg is of the opinion that without a timeline to bring Hong Kong back to pre-pandemic norms, Singapore is going to continue to outperform its Asian rival – whether rents rise or not.
UK house prices could present opportunities for expats
Base rate rises and ex-Chancellor Kwasi Kwarteng’s mini-Budget have had a severe impact on mortgages in the UK, plus there have been predictions of a drop in house prices. But this could open up the market for expat investors, says Alice Haine, personal finance analyst at Bestinvest:
“While [another] rise in Britain’s interest rate — the eighth since December last year as the Bank of England strives to contain runaway inflation — might not seem like good news for expatriates with an outstanding mortgage on a UK property, increasing borrowing costs can also present some opportunities. House prices are expected to drop significantly next year following more than two years of bumper growth, with some anticipating a double-digit drop as the squeeze on domestic spending power tightens even further.”
Quite how far house prices are expected to fall remains moot. Savills has predicted a 10% average fall but says that house prices could drop by 12.5% in London and the South East, although elsewhere it suggests that prime inner London property might experience only a 2% drop, and Lender Nationwide has warned of a ‘worst case’ scenario drop of up to 30%. Most financial experts suggest, however, that it’s not likely to be quite that dire, and that the pound’s crisis under the fleeting Truss administration has stabilised.
Ms Haine suggests that the weakness of the pound could prove advantageous to those expats who are in receipt of salaries that are either in USD or pegged to the dollar (such as the dirham in the Emirates).
“A weaker pound means their income will stretch much further, so now might be a good time to overpay on a mortgage to reduce the monthly repayments ahead of a fixed-rate deal expiring. While prices are already on the turn, with a drop of almost 1 per cent in October compared to the previous month and slowing annual growth, the market will quickly switch to a buyers’ market as domestic buyers retreat amid higher living and borrowing costs, leaving a window for UK expatriates and foreign national buyers to swoop in.”
Reduced stamp duties – again a legacy of the ill-fated mini-budget – give an added incentive, although it’s not clear yet whether Jeremy Hunt will rescind on this in the November 17th budget. Savills say that the high end of the property market is likely to remain reasonably buoyant, telling The Times:
“The rarefied market in central London’s top postcodes continues to look good value in historical terms, particularly when seen in the context of the weaker sterling and strong dollar.”
Keep an eye on financial advice from the UK after the budget, particularly in the spring, if you’re thinking of investing in property in the UK. The situation continues to be volatile but may be to your advantage if you’re in a position to buy.