Advice for young expat - buy house or invest in shares?

Hi all,

Although I am not new to these forums, this is my first post. I am a young Aussie expat (24) working in Hong Kong. I've been overseas for about 12 months and have been investing in shares. I've built a portfolio of about $75k which is a combination of investments made in Aussie stocks and managed funds prior to AU departure and managed funds bought in HK.

I am now considering entering the Aussie property market and getting an IP. Do you guys think this is a good idea? My concern is that investments in HK are tax free and denominated in USD so I have no currency risk. Conversely, to buy a property in Aus may need to (depending on the downpayment size) sell some HK investments in USD and convert the money to AUD at the rate which is significantly higher than average. Moreover, I'll still have to fund the loan using HKD (pegged to USD) which is not attractive. I am also aware of the tax benefits (by way of tax credits) that I will enjoy by buying a property in Aus.

Can you guys give me some advice on what you think the best option is for me? I anticipate being overseas (hopefully) for 4-6 years. If it helps in formulating advice, I am saving about $3k a month.

To summarise, my two key decisions are:
a) Should I buy AU property at all?
b) If so, how should I fund it? I have $45k in AUD investments and $30k (equivilant) in HK investments

Cheers,
Wayne

 

Wayne,

I am on a similar boat to yours. Expat working in China, wasn't sure if I should invest in Oz or China / Hong Kong. We have managed funds, aus shares and kept our PPOR in Oz. Wanted to find what else should we invest.

Ended up buying a property in China instead after considering our option and circumstances.

Wanted to let you know that in Hong Kong you have the option of borrowing in Oz dollars. HSBC and some others offer these options to those buying properties back home in Ozland. Do look into these (if you are being paid in AUD, as it helps take away the currency risk)

 

Hi,

Thanks for the reply. I've seen the cross currency loans however they require 30% downpayment and with house prices in HK over the AUD$1mn mark for a 1 bedroom apartment I am a long way off! In addition, wouldn't a loan denominated in AUD still induce currency risk on repayments (as I am paid in Hong Kong Dollars)?

Is your mortgage denominated in RMB or AUD?

Cheers
Wayne

 

Mortgage denominated in USD. Its a choice between SGD, USD or RMB. I am paid in AUD. Best choice for me was USD as the mortgage rate is much lower, there is a risk associated with the exchange rate.

 

Overseas Investor Options

Wayne & Others,
There are a couple of Aust lenders that offer a foreign currency loan service for overseas investors looking to purchase an IP in Australia and will lend in that overseas currency and at that countries interest rate.
Depending on the lender, a 75% or 80% LVR, a range of currencies, foreign country interest rates plus a margin (so could be as low as 1.6% + 1.5% margin on top for HKD).
It takes away the direct FX risk as you are paying in the foreign currency which you are earning.

As to whether the Australian property market will continue to grow as it has, based on fundamentals of supply and demand and population growth, it should continue to perform.

Let me know if I can help.
Good luck with your options.
Greg
Reid Consultants