Only one investment class imposes liabilities on its owners ranging from plumbing problems to storm damage repairs and a host of other maintenance responsibilities. Moreover, this is one of the least liquid forms of investment and the most complicated to buy and sell. Yet many people value property acquisition over all other forms of investment.
These people see property investment as an opportunity to acquire an asset that has practical uses. The problem is that thinking about property investment is often clouded by myth and lack of consideration of alternatives offering higher returns with far fewer liabilities.
First, however, it is important to draw a line between the acquisition of property to provide a home for the owner and other forms of property investment, which are vehicles for savings and capital accumulation.
Home purchase is set apart from purely financial considerations because it carries implications of security, location for specific purposes and, of course, development of a home with all the many consequences this has, many of them devoid of the objective of financial gain. The desirability of buying a home is something of a no-brainer, but it should not be confused with other property purchases.
Developers, especially those seeking to offload their wares in foreign countries, constantly claim there is no better investment. This is simply not true; countless studies have shown there is only one asset class that consistently outperforms all others: equities.
However, especially in Hong Kong, there is a close correlation between the rise and fall of equity and property prices. In general, the property market tracks the stock market with a time lag, but does so with a smoother trajectory. As a result, property prices tend to hit neither the peaks nor troughs of the stock market, but proceed at a gentler pace in the same direction.
