Property financing

Struggling to make ends meet? Switching to a new job may lead to a higher raise than staying put

  • An increment of 1.9 per cent in real terms works out to HK$319.2 per month, hardly enough to cover mortgage payments which will rise by about HK$1,000 per month next year
  • Job switchers can expect up to 15 per cent premium when they jump ship, up to 30 per cent if they are experienced in blockchain, AI or fintech, Robert Walters said
PUBLISHED : Wednesday, 28 November, 2018, 1:30pm
UPDATED : Wednesday, 28 November, 2018, 10:15pm

The cost of living in Hong Kong is outpacing salary increments in Hong Kong, as the end of cheap loans combines with a US-China trade war to weigh on business sentiments, putting a cap on the increments for salaried employees.

Employees in the city will receive increments of between 3 per cent and 5 per cent in 2019, according to Robert Walters’ research released on Wednesday. A median raise of 4 per cent works out to an increase of 1.9 per cent after inflation, according to a separate study last week by ECA International.

“That is definitely not enough, so it’s going to be tough especially for those who need to service their mortgages,” said Kenneth Leung Kai-cheong, a local lawmaker who represents Hong Kong’s accounting industry. “Many companies are being cautious because of the US-China trade war, so the 2019 pay increment is likely to be low.”

Record 1.37 million people are living below the poverty line in Hong Kong

Hong Kong, the world’s most expensive urban centre to live and work in, also has one of the widest income gaps among developed economies, with one in five of the city’s 7.5 million residents classified as being destitute.

A 4-per cent raise on a median monthly salary of HK$16,800 (US$2,146) works out to HK$672 more in the pocket every month before tax, or HK$319.20 after allowing for inflation.

That is hardly enough to cover rising mortgage payments, which will weigh on borrowers as the Hong Kong Monetary Authority is expected to raise the city’s key interest rate by a full percentage point in 2019, as it must follow the US Federal Reserve’s monetary policy in lockstep to maintain the local currency’s peg with the US dollar.

“The government should consider offering more tax relief on mortgage payments to alleviate the burden on borrowers,” said Leung, adding that the city’s property sales have been crimped by the rising cost of servicing mortgages.

Hong Kong’s residents typically spend between half and up to 60 per cent of their net income on mortgage or rental payments, bankers said. For a typical 30-year housing loan of HK$4 million, the higher interest rate will translate to HK$1,000 more in monthly instalments, even if Hong Kong’s commercial banks were to absorb half of the higher rate and pass 0.5 percentage point to borrowers.

The solution for Hong Kong’s hard-pressed salaried workers may be to jump ship and find new jobs, said Robert Walters, one of the world’s largest recruitment agencies with operations in 28 countries.

Jobseekers can expect between 10 per cent and 15 per cent premium when they switch jobs, and up to 30 per cent increase among those who possess qualifications or experience in financial technology, artificial intelligence and blockchain, said the agency’s Greater China Managing Director Matthew Bennett.

“We expect technology and innovation will continue to drive growth in Hong Kong’s job market in 2019,” Bennett said in an interview with the South China Morning Post. “More jobseekers are upgrading their professional abilities to meet a growing market demand for specialists with technology skill sets.”

Up to 89 per cent of Hong Kong’s employees are “open” for new job offers, even if few are actually actively seeking to switch, according to the Robert Walters.

To make ends meet, some employees are resorting to investments to supplement their income. That could have worked in 2017 when the Hang Seng Index rose 36 per cent. But the benchmark index fell 13 per cent this year, weighing further on investors, especially those who bought shares using leverage and margin financing.

“The low increment in salaries is set to discourage investors,” said Christopher Cheung Wah-fung, Hong Kong’s lawmaker for financial services and brokers. “The stock market turnover is down by almost 50 per cent to about HK$60 billion. Most brokers will not be seeing any raises next year, or 1 per cent increment at most.”

To retain talent, employers should offer better work-life balance, invest in job satisfaction and career growth for their staff, Bennett said.