Buying a Property in Hong Kong
What to expect from the property purchase process in Hong Kong…
Land in Hong Kong is unique in that it all belongs to the government. Anyone buying property buys an agreement of lease, ranging from 50 years to 999 years. Almost any individual is entitled to buy, but companies wishing to do so must be registered with the Hong Kong Companies Registry.
Finding a property
The most convenient way to locate a property is through a local property agent, who will manage the entire buying process including price negotiations. The property agent will take a commission on the sale, which is often negotiable but is usually one percent of the sale price, collected from both the vendor and the purchaser.
Many local newspapers, websites and magazines also have classified sections with extensive property listings. Some will be associated with agencies, others will be direct transactions.
Financing the property
It is fairly straightforward to get a mortgage for the purchase of a property, although it is much more difficult to get a mortgage on properties that are older than 10 years. It is possible to mortgage up to 70 percent of the property's value for second-hand properties, and all banks offer a variety of options depending on the buyer's needs.
The following documents are needed to apply for a mortgage:
- a copy of the buyer's Hong Kong Identity Card
- a copy of the provisional Sale and Purchase Agreement (if available)
- proof of income
Negotiating the purchase
It is advisable to have a solicitor look over all documents pertaining to the transaction, beginning with checking ownership. According to the Land Registration Ordinance, all leases must be listed at Hong Kong's Land Registry office, where searches can be conducted for a nominal fee. Buyers should have their lawyer conduct a detailed title deed search to make sure everything is in order with the property in question.
A list of Hong Kong solicitors can be found at the Law Society of Hong Kong website. Among other things, the solicitor should check whether the property has an existing mortgage. If so, the sale terms must specify that the mortgage will be cleared before the transaction of property is made.
After the asking price has been agreed on, it is typical to sign a binding provisional agreement which includes a non-refundable deposit. Once this has been completed, the solicitor can begin the search while the final Sale and Purchase Agreement is drawn up for approval. On the signing of this Agreement, the purchase deed will be drawn up by the buyer's solicitor and approved by the vendor's solicitor before any money changes hands.
Before the final agreement is signed, the buyer and seller should visit the property to ensure they are jointly agreed on all items included in the sale, as well as to determine the completion of the sale and handover of the property.
Once the Agreement is signed, the buyer takes responsibility for insurance. It is often stipulated in the mortgage that insurance must be in place before money is released to the vendor.
Taxes, fees and charges
There are a number of costs associated with property transactions. These include:
- property agency fees (typically one percent of the sale price but negotiable)
- solicitor's fees (negotiable)
- stamp duty (roughly 0.75 percent to 4.25 percent of the property's value) must be paid within 30 days of purchase; the Inland Revenue Department provides comprehensive instructions on how to calculate stamp duty
- search costs; the Land Registry provides a table detailing search of land costs
- deed registration costs; the solicitor should arrange for deed registration under the Land Registry so that the property is filed in the lodgement list
- For details of associated fees: Click here
- quarterly government rates
- property tax; owners who derive rental income on owned properties must pay property tax, calculated according to the net value of the property for the given year
- For a guide to calculating property tax: Click here
- mortgage arrangement fees
- property management fees, levied by building management to cover electricity, security and other miscellaneous maintenance costs
- Special Stamp Duty must be paid within 30 days of purchase for any residential property acquired on or after 20 November 2010 and resold within 24 months (if the property was acquired between 20 November 2010 and 26 October 2012) or 36 months (if the property was acquired on or after 27 October 2012)
- For a guide to calculating Special Stamp Duty: Click here
- Buyer’s Stamp Duty (15 percent of the property’s value) must be paid within 30 days of purchase for any residential property acquired on or after 27 October 2012. It is payable by any person (or company) not permanently resident in Hong Kong