🏡 How to use the property market to allocate assets? Professional advice from financial planners

As a Hong Konger, home ownership and the property market are truly a topic that "almost everyone has a stake in, and no one misses out." Hong Kong property prices have remained strong for a long time. Whether you're buying for personal use, investing, or allocating assets, how you allocate your assets is often crucial to wealth growth. Today, I'll share insights from a financial planner's perspective on how to optimize asset allocation through the property market. I'll also share practical strategies and risk considerations, so you can avoid blindly chasing properties and instead make steady investments.

🔑 Why is the property market the most important asset allocation tool for Hong Kong people?

1. Limited supply and long-term demand

Hong Kong's limited land supply and dense population mean that even with the ups and downs of economic cycles, long-term demand for housing remains. This "rigid demand" provides a certain degree of support for the property market.

2. Strong anti-inflation ability

Financial planners point out that property prices tend to rise with inflation, especially in prime locations, which can effectively hedge against currency devaluation. For Hong Kong residents, owning property is like owning an "inflation-proof asset."

3. Leverage Advantage

The bank mortgage system allows investors to enter the market through "leverage," meaning they can control large assets with a smaller down payment. When the property market is buoyant, the rate of return is magnified.

📊 Asset allocation advice: How to allocate the proportion?

Financial planners generally believe that one should not put all funds into the property market, otherwise one will face the risk of fluctuations in a single market.

✅ Recommended ratio (for middle-class reference):

• Property assets: 40%–60% (self-occupation + investment)
• Equity funds: 20%–30% (diversified across global markets)
• Bonds or deposits: 10%–20% (to maintain cash flow and stability)
• Other assets (gold, insurance, retirement funds): around 10%

Editor's note: This ratio is not absolute and will be adjusted according to age, risk tolerance and family needs.

🏠 Property Market Entry Strategy

1. Live in the house first, then consider investment

Financial planners recommend that the first floor should be primarily used for personal use, as this saves on rental costs while providing a stable home. Self-occupied properties are not for short-term speculation but for long-term holding, as their value will gradually appreciate over time.

2. Choose a location with potential for value-added

• Convenient transportation (near subway station🚇)
• Complete supporting facilities (schools, shopping malls, medical facilities)
• Regional development planning (new railways, new commercial areas)

These factors usually drive up property prices and more stable rental returns.

3. Control leverage and avoid excessive borrowing

While Hong Kong's property market has experienced long-term appreciation, it also experiences periods of decline. If borrowing excessively, you risk negative equity if property prices adjust. Financial planners advise keeping mortgage payments below 35% of your income to be able to withstand interest rate hikes or income fluctuations.

4. Consider rental returns

When investing in real estate, you shouldn't just focus on price appreciation; you also need to consider rental returns. Typical residential rental returns in Hong Kong are around 2%–3% . If the net return is too low, you may want to consider other assets.

⚠️ Risks and Challenges

📉 Property market adjustment cycle

Historically, Hong Kong's property market hasn't always experienced price increases. For example, during the 1997 financial crisis, the 2003 SARS outbreak, and the 2019 social unrest and pandemic, property prices all experienced significant declines. Investors should be prepared.

💸 Interest rate risk

Hong Kong's mortgage rates are affected by US interest rates. Once US interest rates continue to rise, the mortgage burden will increase significantly, and stress testing will become more important.

🏦 Government policy

Policies such as additional stamp duty, foreign buyer tax, and mortgage ratio restrictions will affect property market liquidity and investment returns.

💡 Editor's Tips

• Don’t blindly follow the trend : just because your friends make money buying properties doesn’t mean you will too.
• Long-term planning : The property market is not suitable for short-term speculation. After buying, you should be prepared to hold on to your property for 5-10 years.
• Maintain cash flow : Don't tie up all your funds in bricks and mortar; keep some liquid funds to cope with unexpected needs.
• Diversify your investments : Real estate is an important asset, but stocks, funds, and pensions should not be ignored either.

📌 Summary

The property market is a crucial component of Hong Kong people's asset allocation, but one shouldn't go all-in, as this can easily lead to setbacks caused by interest rate fluctuations, policies, or market adjustments. Financial planners recommend starting with self-occupation before gradually expanding into investment properties, while also managing leverage and diversifying risk.

My final words: The property market is a long-distance race, not a sprint. As long as risk management is done properly, the property market can still be a core tool for Hong Kong people to increase their assets. 🏘️💰