First of all, we need to make it clear that the reason why we want to discuss the topic of "buying a house or buying US dollars to save" is because we hope to obtain the highest possible returns through our own funds. In other words, we The “buying a house” discussed is an investment behavior, not a consumption behavior, and naturally it does not fall into the category of “consumer necessities”.
The reason why I say this is because if you are considering buying your first house, that is, your own home, I would suggest that you consider holding this fund and wait until the housing market stabilizes before buying your own home. Self-owned housing, because it is just needed, does not belong to the same asset type as pure investment dollar savings, because they cannot be compared together. Therefore, I don’t agree with the idea of ????making more money by buying a house or making money by saving US dollars. After all, we need to clarify the purpose of buying a house first, and then start discussing “how to make a choice.” It would be better.
So, if we consider the question "Is it more cost-effective to buy a house or save US dollars" purely from an investment perspective, I also hope to make a rational and objective analysis based on different situations.
First of all, we know that there are two ways to make money by buying real estate. One is more common in mainland China. Everyone hopes to buy this house for a short period of time or sell it for cash. Earn the price difference caused by the appreciation of the house and make a profit. In this case, if we compare "buying a house" and "buying a U.S. dollar and saving", there is actually no way to guarantee that which one is more cost-effective. It can only be said that if you catch up with the good time to buy a house, such as three or four years If you bought a house before or even earlier, then naturally, now is the best time to sell your house. In this case, compared with US dollar savings in Hong Kong, buying a house is naturally more profitable. If you buy a house now when house prices are at a historical high, then due to the uncertainty of future market development and national policies, the gain from your house purchase is impossible to calculate. In terms of U.S. dollar savings alone, the return is simply the return of capital in the first eight years, and then doubling every eight years, because this is the calculation method of compound interest.
The second way to make money by buying a house, and one that I personally prefer, is to invest in real estate, then hold it for a long time, and earn returns through monthly rent collection. There are many advantages to this method. First of all, the rental stability will be better. The premise is that you must ensure that the vacancy rate of the house is not too high. The usual method is to appropriately lower the rent. This has very high requirements for the city where the house you buy is located. The city must be developed enough and the flow of people must be rich enough. The best example is Hong Kong. In Hong Kong, there is a saying that "three houses in one life". To put it simply, a person should buy three houses in his lifetime, one to live in, one to send his children, and one to collect rent. Therefore, most locals in Hong Kong buy houses. They all want to be housewives. After all, there are never enough residential buildings in Hong Kong and they can always be rented out.
At this time, let’s simply calculate the rate of return for buying a house in Hong Kong, and then compare it with US dollar savings. The highest rate of return on houses in Hong Kong is in Yujingwan. The houses there are cheaper. Renting is expensive. "It's cheap" because Hong Kong locals generally don't like Royal View Bay. Because it's on an outlying island, it takes half an hour to get to the city center by transportation. Therefore, for Hong Kong people who pursue speed and efficiency, housing there is not easy. It is favored, so house prices have been unable to rise. However, renting is very expensive because the island environment of Royal Bay is very popular with foreigners. A large part of foreigners in Hong Kong live in suburbs or outlying islands. Because the environment and air there are better, and shopping is actually quite convenient. Therefore, foreigners who do not intend to live in Hong Kong for a long time will naturally not consider buying a house in Yujingwan, but will consider renting in Yujingwan. This is the reason why houses in Yujingwan are cheap to buy but expensive to rent.
Because I graduated from the Mathematics Department of Hong Kong Polytechnic University and am quite sensitive to numbers, I will do some simple calculations below. A house in Royal View Bay with a usable area of ??40 square meters is priced at about HK$3.6 million per month. The rent is HK$12,000. To buy a house in Hong Kong, if the conditions are good, you can pay 20% of the down payment, and the loan interest rate is about 2.0%. For a 30-year loan, the monthly mortgage payment is HK$9,000, the monthly net income is HK$3,000, and the annual net income is HK$36,000. Your total investment is the down payment, legal fees, and various taxes, which totals about 900,000 Hong Kong dollars.
So, to put it simply, we invest 900,000 Hong Kong dollars and get back 36,000 Hong Kong dollars every year. The annualized return is 4%. According to US dollar savings, the short-term annualized return is 5 points, and the long-term (more than 20 years) annualized return is 7 points or even higher. , in this comparison, it is more cost-effective to save in US dollars.
What’s more, our analysis of houses still assumes many optimistic situations. For example, we assume that the vacancy rate of houses is 0. (This is very easy to achieve in Hong Kong, but in the Mainland, even if It is rare that the core areas of big cities have such a low vacancy rate); secondly, the down payment ratio for buying a house in Hong Kong is relatively low compared to the mainland, and the mortgage interest rate is also much lower than the mainland. These advantages help us obtain higher rates of return when investing in real estate.
The example I just gave is the situation in Hong Kong. In fact, since July 2015, Hong Kong’s housing prices have been on a downward trend due to the threat of the Federal Reserve raising interest rates. It was not until July 2016 that the housing market slowed down. Slow recovery. Compared with the mainland real estate market, Hong Kong's real estate market has the advantage of obtaining relatively stable returns through rent collection. In addition, if the mainland real estate market continues to grow as it did in the first half of this year, buying a house will naturally bring in money faster in the short term than US dollar savings, but the risk is also quite high!
Therefore, we found that if you use real estate as a means of short-term arbitrage, it cannot be compared with U.S. dollar savings. After all, U.S. dollar savings are actually a long-term investment, used to meet the urgent needs of education and retirement. Therefore, stability is the primary consideration for this type of investment.
If you regard real estate as a long-term investment project, then I would recommend you to choose the core areas of big cities. However, because the vacancy rate of domestic urban houses is as high as 22.4%, the first-tier houses in first-tier cities are vacant. The rate is around 8%. Therefore, collecting rent by buying a house in the Mainland also needs to be carefully considered. In the most ideal situation, such as Hong Kong, the rate of return for buying a house and collecting rent may reach 4% or 5%. However, compared with US dollar savings, due to the calculation method of compound interest, the rate of return is in the 15th percentile. It has exceeded 5% in 2018. Therefore, in the long run, the rate of return on U.S. dollar savings will be higher.
Author: Xiaomeng talks about financial management
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Source: Snowball
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