Hong Kong: Business Environment
Residence and Property
All nationals require visas to enter Hong Kong (with the exception of British nationals who are allowed visa free entry for a period of 6 months). The rules governing residence and employment visas in Hong Kong are extremely complex, and have become even more so since 1997.
As a general rule, any person other than those having the right of abode or right to land in Hong Kong, must obtain a visa before coming to Hong Kong for the purpose of education, taking up employment, training, investment or residence.
It is also possible to travel to Hong Kong as a visitor, and to obtain employment while there. However, it has become increasingly difficult for the employer concerned to obtain a work permit in such cases, and this method is not advised.
Transfers of specialised or managerial staff within companies for a limited period of time are usually uncontentious; but recruitment of specialised staff to enter Hong Kong is quite difficult.
The government's policy on importation of labour is:
- Local workers must be given priority in filling job vacancies available in the job market, however employers who are genuinely unable to recruit local workers to fill their job vacancies should be allowed to bring in imported workers;
- Employers are required to register relevant job vacancies at the Labour Department for a specified period;
- Imported workers are to be paid at least the median monthly wages of comparable local workers;
- Imported workers are permitted to remain only under direct employment by the same employer under the standard Employment Contract throughout their period of stay in Hong Kong and the contract is governed by all labour laws in Hong Kong;
- Upon the completion of their Employment Contracts, they are required to return to their places of origin; and
The government operates a 'Supplementary Labour Scheme' under which it is possible to import labour. All applications have to be submitted to the Job Matching Centre of the Labour Department for initial screening to establish whether the wages and job requirements for the vacancies for imported workers are no less than those given to comparable local workers.
Each application then has to pass three tests:
- make genuine efforts to recruit locally through newspaper advertisements for two weeks;
- concurrently with the newspaper advertisements above, participate in the Labour Department's Job Matching Programme for four weeks; and
- where appropriate, go through the Employees Retraining Board to see whether special courses can be organised to train up local workers in accordance with the requirements of the employers.
Upon the advice of the Labour Advisory Board, the government will consider whether to approve or refuse each application. Once an application has been approved, the employer can arrange for the imported worker(s) to submit application(s) to the Immigration Department for entry visas.
In 2008, 28,000 foreigners came to work in Hong Kong and settled in the jurisdiction, including about 5,500 from the Mainland.
Quality Migrant Admission Scheme
In October, 2007, Hong Kong leader Donald Tsang announced new plans designed to ensure that Hong Kong's position as a leading global finance hub is consolidated and strengthened. He observed that China's rapid development and the opening up of its financial sector have presented unprecedented opportunities for Hong Kong's financial-services sector.
Tsang added that with these large-scale development projects, Hong Kong will need to expand its pool of skilled workers, and will "require talented people from everywhere". Consequently, to help attract more qualified people, the Quality Migrant Admission Scheme's requirements have been relaxed and widely promoted.
Changes were announced to the Quality Migrant Admission Scheme (QMAS) in January 2008. The changes included: lifting the upper age limit of 50; adjusting the marking scheme under the 'General Points Test' so that younger degree holders have a better chance of meeting the minimum passing mark for further assessment; giving points to applicants with two to five years working experience; and giving extra points to those who are proficient in a foreign language in addition to Chinese (Putonghua or Cantonese) or English. The extension of stay requirement for entrants admitted through the Achievement-based Points Test (APT) was also streamlined. The Immigration Department will grant an extension to an APT entrant and his/her dependants if it is satisfied that he/she has the financial means to sustain their living in Hong Kong.
From February 2008 to December 2010, the average monthly intake under the scheme was 105. Before the rules were relaxed, the average monthly intake was 67.
Capital Investment Entrant Scheme
Hong Kong also runs the Capital Investment Entrant Scheme, which facilitates the entry for residence persons who make capital investment in Hong Kong but would not be engaged in the running of any business in the SAR. The entrant is allowed to make his choice of investments amongst permissible assets without the need to establish or join in a business. The scheme is available to all foreign nationals (except nationals of Afghanistan, Albania, Cuba and Democratic People's Republic of Korea), Macao Special Administrative Region (Macao SAR) residents, Chinese nationals who have obtained permanent resident status in a foreign country, stateless persons who have obtained permanent resident status in a foreign country with proven re-entry facilities, and Taiwan residents.
During the Chief Executive’s 2010-11 Policy Address it was announced that the investment, net asset and net equity entry requirements for admission to Hong Kong under the Capital Investment Entrant Scheme have been increased.
After a review of the scheme, during which the government took into account overseas practices, changes in economic indicators, and the views of the public and Legislative Council members, the requirement was raised to HKD10m (US$1.3m) from HKD6.5m. In addition, real estate is suspended temporarily as a class of permissible investment assets under the Scheme.
Following the amendments, it was said that the Scheme remains competitive compared with similar overseas programmes. The investment threshold, net assets and net equity requirement will be reviewed every three years. The arrangement of the temporary suspension of real estate as a class will also be assessed at the next regular review, or earlier as necessary.
Since the Scheme’s introduction, 8,200 investors with 15,500 dependants have been admitted to Hong Kong, bringing in HKD58bn in investment.
After a slump in property values and costs in 2001-2003, Hong Kong’s residential prices leaped 90% up in the five years to January 2008. The market went into reverse again in 2008 with falls of up to 25% in most categories of property. Transaction levels fell, and bank lending dried up, at least for non-HK residents without local income. But strong demand from mainland China in 2009 resulted in an overall increase of 20% in property values in that year and prices rose 65% in the two years to March 2011, reaching a 13-year peak.
According to the Knight Frank Prime Global Cities Index prime property in Hong Kong recorded the strongest annual growth of any city in the Index, with prices in June, 2011, 16.1% higher than twelve months earlier - and this during a period when global prime property prices slowed considerably.
"Hong Kong has retaken its position at the top of our performance rankings partly due to strong annual growth of 16.1% and partly as a result of slower price growth in Paris, which topped the table last quarter. Despite the global financial crisis prime property prices in Hong Kong have followed an upward trend since Q4 2008, rising 75.9% over this period," said Knight Frank.
According to a survey by ECA International, the human resources consultants, Hong Kong is the third-most expensive place in the world to rent a two-bedroom apartment, partly due to the sheer lack of space in the territory. "Additionally, low interest rates, high liquidity in the market and a shortage of supply have contributed to pushing rents up," observed Lee Quane, Regional Director, ECA Asia.
Tenants can expect to pay around US$4,000 per month for a modest 120 square metre apartment in Kowloon, while a relatively luxurious abode measuring about 350 square metres will cost as much as US$300,000 per year.
Following a significant inflow of 'hot money', leading to substantial increases in asset prices in Hong Kong, the Financial Secretary, Mr John C Tsang, announced new anti-property speculation measures in November 2010.
New measures include a Special Stamp Duty on residential property and stricter lending criteria for Hong Kong banks.
In the latter half of 2011 there are signs that the market is beginning to cool, however. Recent research from Knight Frank suggests that in the residential market, some homeowners lowered their asking prices marginally in September and caused a fall in secondary residential prices. On the leasing front, some landlords agreed to lower their asking rents in order to secure tenants quickly, causing a slight downward adjustment in luxury rents of 1.7% last month.
Thomas Lam Ho Man, Head of Research at Knight Frank in Greater China said: “looking forward, with the world economy slowing and major stock markets entrenching in a bear environment, demand for office spaces is likely to soften in the coming months. However, due to a lack of new supply and low vacancy levels, Grade-A office rents is likely to remain stable, while the rental gap between core and non-core areas would be further narrowed. Besides, although the government announced in the Policy Address that it will launch a new Home Ownership Scheme and supply more land for private housing, the problem of housing shortage would not be solved in the short term. Unless the sovereign debt crisis in European severely worsens, home prices will see minor adjustments by the end of the year.”
A report by Barclays Capital Asia in August 2011 warned that property prices may fall by as much as 30% in 2012 due to rising mortgage rates and falling purchasing power among potential buyers.