bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

ESTATE agents selling British homes in Hong Kong have been accused of misleading possible buyers about the investment potential of their properties.

 Brian Shillinglaw, director of property agents RDA Estates accused his competitors of 'laziness' in publishing only the gross investment returns available on British properties.

 'Hong Kong people are buying properties without the full picture,' Mr Shillinglaw said. 'A gross return means nothing, because it does not take into account the [extra] costs the buyer incurs.'  Instead, firms should only advertise the net returns available on properties, he said.

 Essentially, the yield or return on a property is its income rental compared to the purchase price. The higher the yield, the more profitable it is.

 Gross return is calculated before the costs of managing a property are included, and there is often a wide disparity between gross yield and net return, Mr Shillinglaw said.

 For example, the gross yield for a home in the Brighton and Hove area of southern England where RDA Estates operate, is typically 13.5 per cent, while the net return is eight per cent, he said.

 The net return is calculated by deducting tax and operational costs from the annual rental income. Costs include estate agent's letting and management fees, ground rent, maintenance and insurance. Water and sewage costs should be included too, unless they are being paid by the tenant.

 These expenses can be written off against tax which is 25 per cent of the gross rental income in Britain, Mr Shillinglaw said. This, combined with tax relief on mortgage interest, usually covered a landlord's tax liability.

 It was easy for estate agents to work out the running costs of a property and calculate the net return, he said. This was routinely done by potential buyers' solicitors.

 Gunilla Kirchner, manager of the Hong Kong office of London estate agents Cluttons, admitted her firm quoted gross yield figures because 'it sounds more attractive'.

 But she also said it gave a truer picture of possible profits by excluding optional expenses such as estate agents' charges.

 Though most Hong Kong clients who buy in London will hire Cluttons' to manage their new investments, a few may decide to run it themselves, have a friend or relative in Britain do it for them, or even choose another agent for the task, Ms Kirchner said.

 It was therefore wrong to deduct estate agent charges from gross yield figures to give a net return, because it might not be relevant to a clients' situation.

 Estate agents may charge 15 or 16 per cent of the rent to find tenants and manage a property, Ms Kirchner said.

 Terry Smith, mortgage manager for Matheson PFC said estate agents should specify whether advertised yields were gross or net.

 'Most Hong Kong buyers are buying for investment and therefore yield is all important,' he said.

 It was better for agents to quote the net return although it was sometimes difficult to work out all the operational costs, he said.

 But he claimed most Hong Kong Chinese buyers were aware of the difference between gross and net yields from the local property market.

 It was the British and other expatriate buyers who were not familiar with the different terms that were most in danger of being misled, he said.



Estate agent blasts misleading sales blurbs on British homes