Christopher Dillon is a writer and entrepreneur who has lived in Hong Kong since 1992. His book LANDED HONG KONG provides readers with an understanding of property law and insights on real estate throughout the city.
During his interview with Spacious, we discussed his motives for writing the book, his thoughts on the current and future markets, the business aspect of Chinese culture and the types of foreigners who may fit in here.
Why motivated you to write LANDED: HONG KONG?
“It was actually almost an accident. I had come from a publishing background, I lived in Japan. I worked for a company that produced annual reports and similar reports for big Japanese companies. When I came to Hong Kong, I ended up working in the public relations business and I set up a company in 1995, with two partners. We sold it in 97… In 2000, I set up another company and at that point I rented office space, from 2000 – 2002. When my lease expired in 2002, the real estate market in Hong Kong was really depressed. We were still suffering from the Asian financial crisis, and also it was before SARS had hit, but the real estate market was very, very grim. I had been renting space for my new business and the lease expired and I had cash from the sale of that business and I looked around and I thought ‘Hang on a second, well why not buy some real estate’ and what I bought was an office. A couple of years later, I bought an apartment… at the end of this, I had bought residential, commercial and industrial property and I realized there was nothing in English explaining how to do that… so that’s where the idea where the book came from. It was a market gap there.”
A comment made in your book, which I found interesting was ‘Understanding property law in Hong Kong isn’t difficult, what’s difficult is — the practice!’ Can you elaborate on that?
“Absolutely right. That’s a really good insight, because, having been involved and written books about property around Asia. Hong Kong is really clear. It’s all British common law, you have the benefit of precedents, so unlike a lot of places, Hong Kong law is very transparent and it’s easy to get your head around. But it’s just figuring out how the bits and pieces work.”
One of the things that I didn’t see in your book, was a chapter on understanding the mentality of the Chinese in Hong Kong. Understanding cultures tend to be one of the biggest difficulties for foreigners doing business in Asia. Does traditional Chinese culture play a role in business? Does something like ‘Saving Face’ play a role in business?
“Good question, one of the things that I like about Hong Kong people and about Hong Kong in general, is people here are incredibly pragmatic. They’re very practical people. When you’re here, it’s relatively easy to get deals done. People aren’t interested in playing games, they’re interested in moving product. Like anything else, there is an element of saving face, but people are, at the end of the day, very practical. The one thing that I could say, that I have seen that speaks to what you’re saying, is people sitting on a loss for a long time. People don’t like to admit they made a loss on a property deal, so you’ll see landlords leaving a flat empty or an office empty. Because they would rather do that than take a loss. You don’t take a loss until you actually sell the property. So they’ll let it sit for a year or two or longer sometimes and then sell it so they don’t actually confront the idea of taking a loss. But in terms of doing property deals, Hong Kong is really easy. Contrasted with a place like Japan, where if you buy an apartment there as an investor, you can’t see the inside of it if it’s tenanted. That or getting financing or being able to see the property registries and find out who owns a piece of property and what the history of it is. Hong Kong is not perfect, but it’s an easy to manage market.”
You’ve been in the city for a while, can you explain how it has changed over the last 20 years?
“The biggest thing is that in the lead up to the handover, pre 97, there was a huge amount of uncertainty, Hong Kong was famously called ‘A borrowed place on borrowed time,” and in the immediate period after the handover everybody sort of held their breath. In 1997, 1998, everybody was just sort of waiting for the other shoe to drop, and it didn’t — it was astonishing. Around 1998, people just sort of let out a collective breath… A lot of people who didn’t live here prior to the handover were expecting massive changes and really the changes were very subtle. You didn’t see the Queen’s head on the coins anymore, or on the postage stamps, but Hong Kong pretty much carried on the way it had carried, except a lot of the uncertainty had been removed. Now you’re seeing some differences because we’re getting closer to 2047 when one country, two systems comes to an end… One of the most practical aspects of that is next year, you’re going to have mortgages that are going to stand the 2047 handover. And nobody really knows what is going to happen with that. Hong Kong was guaranteed under the basic law that we would have our style of life and we would continue to be capitalist until 2047 and it there were already suggestions before the handover, 2047 didn’t mean that it had to stop, we’re just guaranteed our way of life until then. Nobody really knows, some have said that we could carry on in the same fashion after 2047, but there still is a question mark about how Hong Kong will function, how things will carry on. I am optimistic about it… Right now, if you buy a piece of property that was included in one of the original land grants from the 1800s, the British system when Hong Kong’s land was first actually granted by the British Crown to individual buyers, all of that paperwork is still completely valid… it’s pretty astonishing when you consider everything that’s happened in the meantime. There’s nothing to say that the wheels are going to fall off when 2047 rolls around. China is changing very rapidly, and Hong Kong isn’t perfect but, it does a lot of things really well. It’s entirely possible that some hybrid of the current system in China and our current system in Hong Kong could be the ‘modus vivendi’ in 2047.”
That’s thirty years from now. Do you potentially see buyers offloading their property 10 to 15 years from now?
“It could happen. This is an extremely sentiment driven market. Particularly if you’re talking about individual investors. If you look back prior to the period when the joint declaration was made in the 80s, and during the riots in the 60s, there have been periods when Hong Kong people have been twitchy and there have been mass migrations because people weren’t confident in Hong Kong’s future. It’s not out of the realm of possibility. It goes back to Hong Kong people being very practical and very pragmatic and very interested in making a buck. A lot of people left in the 1980s and in the run up to 97, and moved to places like Vancouver and got off the property ladder and got off the career ladder and a lot of those people, looking back, probably would have done something differently… Canada was safe and the air was clean, and you could drink the water, but in terms of the career opportunities and the level of taxation, Hong Hong with the benefit of hindsight, is a better place to be.”
What kind of people won’t fit in there? What kind of families or what types of individuals may want to think twice before moving there?
“Good question, there was a piece in the paper over the weekend about an openly gay executive who is suing a doctor because he wouldn’t do surgery on him. I think he had sleep apnea and the gentleman in question was HIV positive, but had been taking antivirals for so long, that the viral load was effectively zero. The surgeon refused to operate on him, so he’s actually suing him now. Hong Kong, at its heart, is a traditional Chinese city, with a lot of traditional Chinese values, so if you’re expecting the same levels of social acceptance, if you’re a gay or lesbian as you would find in San Francisco, it isn’t that way. Also, if you’re politically active. If you’re someone who is not just wanting to get along, but somebody who is politically outspoken, you might find this place a little bit constraining that way. If you are somebody who wants to do recreational drugs, if you’re in a place like Vancouver, there are pot dispensaries everywhere. You will not find that in Hong Kong. We’re not quite as strict as places like Singapore where if get caught with a pound of marijuana you could face the death penalty. But we are certainly nowhere near as liberal as places like California or Washington state or Vancouver for that matter. So those are some of the things you’re going to have to confront. Air pollution is another one. If you have a family member who has asthma, sometimes the air pollution here can be an issue, especially when the air blows the wrong way. That’s not unique to Hong Kong, Singapore at this very moment has smoke blowing in from Indonesia and the air pollution levels are spiking there and the air pollution here is actually getting better because a lot of the heavy industry is moving out of southern China. But still, if you’re comparing it to what you’d find in Denver, you might find it a little less than perfect.”
In terms of the most inexpensive properties, buyers would find them in The New Territories, right?
“Generally speaking, the further you move away from central, and the further you move away from an MTR line, the cheaper the prices are. When you think New Territories, very often people conceptualize as it as just a bit between Kowloon and the Chinese boundary, but it actually includes all of the outlying islands as well…”
How important is the Cantonese language in terms of doing business in Hong Kong?
“It’s always an advantage to be able to speak the local language, without a doubt. Having said that, If you enter into a contract, you sign a provisional sale and purchase agreement, on a form that’s provided by the real estate agent, it’s in English and Chinese and it says at the bottom ‘In case of any conflict, the English version of this shall prevail.’ The sale and purchase agreement will be in English. Your mortgage will be in English. One of the great advantages that Hong Kong has got is that, you’re going to be able to do better and get more subtly and nuance out of it if you can speak Cantonese, but you’re not at a total disadvantage if you can’t. Actually speaking of The New Territories, that’s where being able to speak Cantonese is going to be even more important because you probably will be living in a village, you’re going to encounter a lot less English there than you would at say, mid levels or in Kowloon.”
Finally, who will really benefit from your book?
“Anyone who is thinking about buying but is not sure. If you live here, like Hong Kong and want to know what’s involved in buying and whether it’s worth the hassle. But sometimes buying is not a good idea and it’s better to rent. I give an unvarnished view of the process — the good and the bad — so people can make a smart decision.”