TNAG-1558-FCO40-2122-Future-of-Hong-Kong-nationality-and-passports-Hong-Kong-(Br-1986 — Page 145

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your own in Portugal--you'd have to make two trips: one to find the property; two to process the residency application (add, say $3,500 for trip #1, allowing 3 weeks in Portugal to find the pro perty, make legal contacts, etc).

The overall savings total $US30,800; extra costs would be around $4,850, giving you a net saving of $US24, 450.

...and returns

As it's safer to over-estimate costs and under-estimate returns, I'll use the figure of $US65,150 as the total cost, and assume it's all paid on day one. This will over-estimate costs because some (if a small part) of that sum has only to be paid out several years in the future. I'm going to assume we purchase a property in the process of development (I have an aversion to taxes). Since properties bought "off-plan" are normally paid for in a series of payments, this will further overstate costs. (On the other hand, for the first 18 months or so we won't receive any rent--but I'll include that loss of revenue.)

Further, assume you borrow the entire sum of $US65,150 using, say, Hong Kong assets as collateral. The current overdraft rate is 17.25%--18% will allow for fluctuations. We'll borrow in Hong Kong dollars, with an interest-only loan. We'll allow an extra year beyond the six years of residency to include contingencies.

I'm using Hong Kong dollars as most readers of this Report are in Hong Kong. (It's almost impossible to borrow escudos in Portugal as a foreigner--though it's not unattractive. Interest rates are around 34%--but the escudo has been depreciating around 20% a year.

If you qualify for a Portuguese alien passport, you might investigate re-financing your purchase in escudos.)

There are three other advantages of borrowing Hong Kong dollars:

1.

The Hong Kong dollar is currently fixed to the US dollar, so it will decline with the US dollar over the next few years;

2. Political events could break the current Hong Kong/US dollar "link," sending the Hong Kong dollar down and possibly all but writing off the value of your Hong Kong dollar loan; and,

3. In the worst case, you could simply walk away from your Hong Kong dollar liability--allowing the bank to repossess the Hong Kong assets you've used as collateral--especially if you've arranged the finance in a corporate rather than personal name.