Hong Kong Housing vs the World, A Startup’s Real Real Estate costs

I keep writing about Hong Kong housing partly because housing/office/lab rental costs are one of the largest expenses a bootstrapping startup (and what startup isn’t bootstrapping?) has, and partly because the Hong Kong real estate story is so bizarre, depressing, and interesting. Or, as interesting as it can be, in the way that being in a car accident is interesting.

I say real estate is one of the largest expenses a startup has. Some people would argue salaries are, and they are right. But employees and founders use their salaries to pay for housing. Every employee and founder has to live somewhere. An example:

Hong Kong Startup RE Costs

These values came from an IT startup in the SF Bay area. They didn’t spend much on equipment but damn they paid themselves well. I estimated their housing expenses based on the average rental cost of a 3 bedroom house in their area, ranging from $2,200 to $3,750 (all the founders were married with children). The startup spent $941,000 that year, only $92,000 of which was for rent. That doesn’t seem like a lot, right? The bulk of a startup’s expenses goes towards salaries. This is even true with Xingergy, and we need to buy a lot of expensive stuff unlike an IT startup. But……what do founders and employees do with all that money they get paid? They rent property of course! Adding in the annual rental expense of each employee and founder with the startup’s office rent, and you get $279,200 spent in a year on real estate. That is 30%, almost 1/3rd, of a startup’s expenses going towards real estate. Obviously real estate is very important when looking at your expenses. Or burn rate, using industry specific lingo designed to confuse people.

This recent article claims Hong Kong is set to become a top IT startup hub in 2013. Like every other article I’ve read on Hong Kong “becoming a startup hub”, housing is not mentioned once. When rent makes up 30% of a startup’s expenses in a moderately expensive market, and when 50% of the average Hong Kong resident’s salary goes towards housing, making Hong Kong an extremely expensive market, how can real estate costs be so easily ignored when assessing Hong Kong’s viability as a potential startup hub?

Hong Kong Housing CostsI think that rent index gauge is broken….

What do you get for your housing dollars?
The employees of the SF Bay area startup I previously mentioned spent around $3,500 a month on a 3 bedroom house. I emphasize the word house. It is 1,700 square feet, it is clean and well constructed using high quality materials, it has a 3 car garage, a swimming pool with a cabana that has it’s own wet bar and bathroom, a view of the mountains, landscaping. It looks like this:

SFBayAreaHousingImagine pulling up to this baby in your brand new Prius…

In Hong Kong the average 3 bedroom apartment cost $8,400 per month in the city (TST or Central) or $4,700 an hour away from the city (NT), it’s 600 square feet, 1 bathroom, no oven, probably no gas stove, no clothes dryer, no dishwasher, no heater, made out of tile, and I emphasize the word apartment.

Hong Kong average apartment

Those Silicon Valley guys didn’t have to go all out with the engineering party houses, though. They could have been more frugal and gotten a smaller apartment. If you do a search for apartments with 1 or more bedrooms for $700 or less per month in the San Francisco Bay area you will come up with more than enough listings to fill up a weekend or two of house hunting. This little apartment, at 680 square feet, has granite countertops, a full stove and kitchen, a balcony overlooking a pool, and even a little BBQ area. It’s $675 per month with an $800 deposit.

SFBayAreaHousingSmallTo me that kitchen looks like something out of Better Homes and Gardens, such luxury!

That’s right, Mr. Seth Knutson, startups aren’t going to rent those kinds expensive places, we’re going to find cheap housing! Oh, really? In Hong Kong if you search for the same type of affordable housing you will get nothing (HKD5000 = $645). This is where Hong Kong really differentiates itself from the rest of the world. All the housing in Hong Kong wants to be exclusive luxury, no one wants to build nice and affordable. In Hong Kong it’s Upper West Side or Lower 9th Ward.

HongKong Housing Cheap Go HomeThat single listing is either a mistake, a scam, or the deal of the century…

The average 1 bedroom apartment, outside of the city center (meaning at least Shatin or probably the New Territories) cost $1,300 a month. It’s around 300 square feet. Or, you could go cheaper, find a 100 square foot room for $600 a month. Keep in mind those don’t include kitchens so you’ll have to eat out all the time. Better get used to Chinese style breakfasts which, all cultural niceties aside, is about the most unhealthy thing, mostly fried or steamed simple carbs with no fruits, protein, or fresh vegetables, you could put in your body at 8am. For all you Americans, imagine eating a Denny’s Grand Slam breakfast every morning minus the eggs, bacon, and orange juice.

Affordable Hong Kong Housing

This is an average “low end”‘ apartment in Hong Kong. Yes, that is the entire living space. No, I am not kidding. The bathroom, which you do not want to see, runs parallel to the “living room” (making the bathroom 50% of the apartment’s total area). It cost $520 a month.

To sum it all up, a 600 square foot apartment near the city center will cost you $675 in Silicon Valley or $4,700 in Hong Kong. Why would anyone chose to live in Hong Kong? If you located the startup in the Bay area you could pay your employees $4,000 a month less, they’d live in better apartments, and you’d be connected to the world’s largest IT/tech community. A startup with 5 employees would save $20,000 a month, that’s a quarter million dollars a year, by selecting Silicon Valley over Hong Kong (yea I know it doesn’t exactly work like that, but pretty close). I only use Silicon Valley because that’s where the startup I first used as an example is located. You could move to Austin, which is even cheaper, bigger (everything is bigger in Texas), and cooler than Silicon Valley, and just as innovative. Even Apple is moving to Texas.

Reality is Expensive
So, as a founder you are looking at moving to Hong Kong and establishing your company here. You now know that real estate is a big part of your equation. You know how far a bootstrap housing budget will get you in Hong Kong. Not very far. Do you think a “world class team of engineers and scientists” will want to live in a prison cell with Ikea furniture and questionable bedding just to work for you? Hell no. They want that house with a pool and wet bar. Or, before you even get that far, as an entrepreneur with a plan, a deck, and a dream, are you going to be able to afford a place to live in Hong Kong long enough to secure funding, put together a team, develop a product, and start making revenue? Not to mention profit? Can you remain sane in a 100 square foot apartment which is six flights of stairs up from the crowded, polluted streets? Considering the realities of running a startup, the value proposition Hong Kong real estate offers, does Hong Kong still seem like a future startup hub? I’ll leave you with a graph from The Economist showing real estate prices throughout selected regions of the world, starting on the date I moved to Hong Kong. Notice anything?

Housing in Hong Kong 2Technically it’s called an “outlier”, that’s what my teachers used to call me…


There was some discussion about this post (on a private Facebook HK startup group) a while back, among other points of interest the idea of whether or not the prices I quoted here are accurate. One commenter claims his 350 square foot Sheung Wan apartment only cost HKD$12,000 (USD$1,560) a month and therefore my prices are “WAY off”. I’d like to point out I arrived at my prices from averaging multiple rental website’s average prices, so the prices in this post are averages, not specific examples. Your personal results may vary. For instance my most recent apartment was HKD$6,600 (USD$858) per month, a 2 bedroom 700 square foot village house with private rooftop, so there are deals to be had (pictured below). On the other hand, I do agree with him, the prices DO seem “WAY off”, the reality of Hong Kong’s real estate market is almost unbelievable. 

Another commentor claimed I was “an unhappy expat that can’t be bothered to leave Central”. Beyond him obviously accepting the logic of my argument by ignoring it and attacking me personally, I’ve never lived in Central (or HK island) and am quite happy with my years of living in the New Territories (both east rail and west rail lines) and my years living on campus at CUHK. End Rant/Note.




  1. Thank you for this excellent post Seth. On one hand, I’m happy to see how well you have presented this issue – the point on “salaries being the largest expenses” really hit home – but on the other hand, I’m very sad because after reading all this I realize that tons of talents would have probably left HK already (or decided not to come) and apparently there’s nothing we could do about it.

    When I started my business in 2003, everything was much more affordable and yes it was one of the lowest times in our economy, I didn’t hear as much grievances as I do now. It seems that despite the “boom” of the real estate market most people are not happier or living in a better condition than 10 years ago.

    I wish there’s a startup that could fix this.

  2. […] worst of all, the rent is too damn high, from the perspective of an average Hong Kong resident and as compared to the rest of the world. There is no topographic or non-political/business reason for apartments to be this tiny and rent […]

  3. […] Update (Dec 2012): New Territories Village House style Update (Jan 2013): Hong Kong Housing vs The World […]

  4. […] center of Hong Kong. First off, startups bootstrap. You don’t have enough money to support $1,000 per month per founder/employee, plus whatever office/startup location you might have.  Second, why would anyone want to live in a junky, badly designed, overpriced apartment when they […]

  5. […] Or you can read my more informative posts on Hong Kong housing options here (part 1), here (part 2), and here (part 3). […]

  6. Hi all. I would like to share my humble opinion on the article as someone who came here from SF Bay Area. I must say that I agree with the author of the article.

    I came here for Paul’s Startup Bootcamp and AcceleratorHK and ultimately decided to stick it here some more. I feel that HK’s startup ecosystem will rather benefit from having outside entrepreneurs come here, as Hong Kong’s mentality is still somewhat traditional. The more entrepreneurs you have, especially from different background and experience, the better the community.

    I too live in a little “shack” that I call Harry Potter’s cupboard under the stairs (my room is even smaller then the one in the article, 6 stairs to climb and no AC…summer I’m looking forward…) I rent a room in a shared flat partly because it is what I can afford and partly because I don’t know how long I will stay here. Every time that I come home, I’m reminded how my one room in US is 3 times the size of my current place and that’s a shocker for many American entrepreneurs trying to create something here. It’s not something you can get used to overnight. The conveniences here actually become inconveniences and you start missing things such as having a car, driving and able to do grocery shopping in one go.

    The reason a lot of people choose to seek housing in Central (I don’t know any entrepreneur living in mid-levels), CWB, HK side compared to NT etc… (I live in Kowloon) is because as a non-Cantonese speaker, there are shared flats and even some landlords who will rent on short-term basis because they are used to foreigners. Startup founders do not have the means and knowledge of the future to sign a one-year contract, throw two months deposit and one month prepaid. Its absurd! NT is daunting to some of us because of two reasons. 1. Transportation time. Time is money. Spending 1.5 hours commuting to HK Island and back is wasted time doing something else. 2. Communication. There are likely fewer English-speaking people there, which make going to eat rather a challenge.

    I think the author is trying to shed some light for people who may want to come to Hong Kong and give a fair warning. Thank you for that.

  7. […] wanted to share my reply to this article: Hong Kong Housing vs the World, a Startup’s Real Real Estate Cost because It really hits me. I really agree a lot with this post and wanted to share my response to […]

  8. Hi. Can i Share Hong Kong Housing vs the World, A Startups Real Real Estate costs to my Facebook page?

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