Buying a home in Hong Kong as with buying property anywhere requires extensive forethought and research. From personal contextual requirements to vendor issues and legal regulations, the following advice aims to map out the key points of consideration for the first time home buyer in Hong Kong.
Personal Requirements
These form the base criteria that define your property search parameters, first and foremost being your price range. Be realistic, not aspirational to avoid your property turning into an insurmountable financial burden. Ensure that you will be able to cover the cost of the down payment, your mortgage, the possible fluctuations in interest rates (if you opt for flexible rates) and other property associated costs such as maintenance and management fees. This is also dependent on your intent for buying the property – are you seeking high returns in resale value or will it serve as your stable permanent abode? Either way, keep a keen eye on market conditions and economic trends.
Cost issues aside, those with families should factor in school catchment areas as well as neighbourhood amenities. Your commute to work should also be considered and you should have adequate transport links nearby to waylay the cumbersome morning rush-hour commute.
Viewing a place
Ensure that if you delegate flat viewings to an appointed estate agent, that they are fully licensed and that the estate agency agreement is in order. The amount of commission, validity period of the agreement as well as the time of payment should be detailed clearly when this is signed.
Aside from scrutinizing a prospective flat for possible maintenance concerns and its surroundings, a good agent should corroborate your observations by searching the property on Property Information Online (PIO) so as to receive accurate data on the saleable area, age and inspection information on your property of choice.
More importantly however, an agent must ascertain whether the vendor i.e. person who is selling the property, in the capacity of the owner, does not have any ongoing legal entanglements and liabilities (tenancy agreements, subsisting mortgage charge, property tax), before you commit to signing a Formal Sales and Purchase Agreement.
Stamp Duty
Stamp Duty is levied on any sale of residential property. Introduced by the Hong Kong government with the intent of curbing demand in Hong Kong’s overheated property market, the Special Stamp Duty (SSD), Buyer’s Stamp Duty (BSD) and Ad Valorem Stamp Duty (New AVSD) all operate under a series of impositions and exemptions for both Permanent Hong Kong residents and expatriates.
The SSD for instance invokes a tax upon any property that is resold within 36 months and is assessed at rates which span from 5 – 20%. The BSD imposes a duty upon those who are not Hong Kong Permanent Residents whereas the New AVSD introduces new rates on residential properties. Consult our Stamp Duty page for more information.
Applying for a mortgage
Broadly classified into three categories, mortgage plans in Hong Kong which include the fixed rate, flexible rate and deposit link, allow for different Loan-To-Value ratios which in conjunction with the Mortgage Insurance Program allows for up to 90% of the property’s value to be covered.
That being said, when applying to major mortgage providers, be sure to recognize your own abilities to meet the mortgage obligations and hire a reputed solicitor to countercheck the necessary legal documentation.
For more articles describing other buying considerations, including Peter Churchouse’s 10 Key Rules to buying property, please see our numerous Guides to Buying Property in Hong Kong.
