Thursday 25th April 2013

Starting a business can be costly in Hong Kong

Recent research indicates that Hong Kong is the most expensive city in the world in which to establish a business or relocate a small organization.

The World Cities Review, which was conducted by global real estate services provider Savills, examined the costs associated with establishing offices and accommodating employees in 10 worldwide cities. Hong Kong emerged as the most expensive of these cities, beating the likes of London, New York and Tokyo to the top spot.

The research was completed by benchmarking the costs associated with running a small unit of six employees, which included an expat CEO, Director and local administrative staff. Hong Kong topped the rankings of the top ten cities as a result of the high real estate costs associated with renting appropriate office space and housing employees.

The report also highlighted the areas in the world in which investors could expect to achieve the highest rental yields. New York was named as the best place in the world in which to purchase a buy-to-let property, with yields in this American city topping 6.4% on average. London took the second spot with rental yields of 5.2% followed by Sydney with 4.9%.

Commenting on the research findings, Yolande Barnes, author of the World Cities Review, said: “New York stands out among world cities as looking particularly good value, especially from an income return point of view. As residential prices have seen much lower growth than other world cities, New York has fallen in rank from one of the most expensive to a distinctly cheap 'old world' urban centre.

“On the face of it, New York looks a good investment for those seeking good medium-term capital growth prospects and healthy returns.”

However, while the yield on rental income may indeed by high in New York, placing it in Savill’s list of the top ten most expensive cities in the world in which to locate a small business, the hidden costs associated with renting office space in terms of extra taxes, service charges and lettings fees entail that expats who wish to rent business premises in this area of the world can expect to face an additional 53 per cent on the total rental cost.

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