DEBT POLITICS IN HONG KONG (posted in 1997)
tu65uw
Some of our middle-class employees recently may enjoy quiet substantial
raise in their salaries. However, don't be too happy too soon about this,
because there is a price to pay for such raise. They are either be
encouraged or 'compelled' to buy flats, the current prices of which are very
high and have a chance to decline in the light of the current political
situation (Well, whether the prices will go down is pretty much at the hands
of the governemnt.) and they are persuaded or, again, 'compelled' to borrow
from banks if they don't have enough money to pay for their flats.
To give an example, let's suppose that a person is given a HK$10,000.00
raise per month (Wow!) and he buys a HK$2M flat. If the price of the flat
drop by 10% ,i.e., HK$200,000.00 in, say, two years, then he is not better
off with the raise because the total sum of such, which amounts to about
HK$250,000.00 (including bonus etc.), during the same period, is more or
less the same as the losses that he incurs during that period. By the time
you sign up the agreement for purchasing the flat, your boss will have got
his hook on you, because you are then in debt, which may be huge, and he can
have a much better control over you as, if you don't do what he expect or
you do something 'wrong' or 'against' him, he may or will take advantage of
the situation, in which you are in heavy debt, to 'subdue' you.
The drop may even be an optimistic speculation.
Even if the property prices rise, you may still be in heavy debt !
One last word, make sure you can maintain your job or, more exactly, your
salary for a sufficient long time before you sign on the agreement.
Otherwise, think again.
P.S.
It may now sound plausible that the "high land price policy" is a means for
the government to get its hook on the middle class in Hong Kong.
(I am not sure whether it is just a coincidence that the government
expressed that it will increase the tax allowance for our middle class in
Hong Kong soon after I posted this message at another news group.)