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The middle-class immigrant

In the last couple of years, Hong Kong had remained relatively “closed” to the rest of the world. I think the city is bearing the brunt, both on the psychological and commercial front from reduced travel. Basically no one was making plans to get in, unless it was for business. This was favourable from the perspective of a traveller as accommodation prices, once considered to be incredibly high for Hong Kong had plummeted significantly.

And so I had never given much consideration towards the amount of rent paid only until recently.

As most of the world opens up, the return of overseas travel has increasingly led to higher airfares and hotel rates. When I returned to Hong Kong this year, I discovered that the lease on my place had gone up by about 30%. Last year had been a tough period for Hong Kong - 14-day quarantines, tourist inflows from China taking a hit, businesses and residents relocating among other things. So this year, with the anticipation of opening up to the world mounting, I foresee that prices will continue to increase into next year.

When I graduated from university, I was one of the lucky ones who did not have to worry about paying rent or having a roof over my head. After amassing enough savings over 3 to 4 years, I made that decision to buy an apartment rather than renting one. Renting had never really been an option for me, maybe because being a resident in my own country, home ownership was the de facto scenario. Or so it was until I moved to Hong Kong last year.

Owning a place and servicing the mortgage payments work pretty much in the same way as rent with a few main differences.

Both rent and mortgage service are cash expenses. But the action of paying the mortgage every month is different from rent: With mortgage, one takes comfort in home ownership, knowing that your equity position generally improves with every month of debt service (assuming of course the value of your home doesn’t decline), which based on consensus: property is always supposed to be a good store of value. With rent, it’s basically a one way street as a sunk expense with no returns. Buying a property is definitely more cash intensive due to the upfront costs but that is inherently seen as an investment.

Also, the “step-up” in rents can be merciless as compared to mortgages, which arguably at this point of writing, interest rates for home loans have reached a cyclical high. Putting interest rates aside, rents remain much more highly sensitive to short term spikes in supply and demand, while mortgage payments are largely based on the amount you borrow and your declared income upon taking on the loan.

It can also be very difficult to call a rented place home, especially if you do not have any long term visibility of staying in that city. This ’temporary’ or immigrant mindset creates a lot of uncertainty and inertia for doing any ‘upgrades’ to improve your living condition.

To an immigrant, the bottom line is everything. The less I pay in rent, the more I bring home in cash.

While I consider myself middle-class and one of the more fortunate and relatively better-placed immigrants, I can totally feel what it is like to be an outsider alone in a foreign country earning a living, setting aside as much as possible every month with the end goal of going home one day.



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