As you may already know, properties around Hong Kong are expensive, but it doesn’t stop anyone to wanting to buy property in HK. For many of those who plan to stay in Hong Kong for the near future, buying a domestic property or purchasing a home might be a right move. We will cover everything you need to know about buying a property in Hong Kong below and hope by the time you finish reading you will know exactly what you need to think about for purchasing a home in Hong Kong.
Before we continue on the topic, we want to let you know that ROOTS is the first online mortgage broker and startup focusing on mortgage in Hong Kong. ROOTS’ core services include an “online mortgage application form” and “mortgage pre-assessment report”.
The online mortgage application form is an all-inclusive application form which allows you to directly apply bank mortgages at home. The online form will save you time from going to the bank and filling out paper forms.
The mortgage pre-assessment report, is an A.I. algorithm backed feature that can assess your mortgage affordability and application success rate. By using the pre-assessment report, home buyers can understand how much they can loan based on their current financial situation. Therefore, it can avoid the risk of losing the deposit you paid because you were unable to obtain a mortgage loan from a bank.
Last but not least, BOTH of the services are FREE for anyone to use and feel free to contact us should you have any questions.
How To Buy A Property In Hong Kong?
The process of purchasing a property in Hong Kong should be rather similar to other parts of the world, but there are a few key steps you should take note of:
- Complete the mortgage pre-assessment report to understand your affordability and calculate your home purchase budget
- Start house hunting through a property/real estate agent
- Conduct a verbal property valuation on the property you identified through ROOTS
- Sign preliminary sales and purchase agreement and place your deposit
- Complete our online mortgage application form and submit mortgage documents
- Hire solicitor to complete legal documents, pay stamp duty and additional deposit
- Wait for your mortgage to get approved and complete the transaction through a reliable solicitor
Mortgage is a necessity for those who wish to buy a house in Hong Kong and it is crucially important to assess your mortgage affordability with ROOTS prior to your purchase. Assessing your affordability for your mortgage is part of the budget planning and similar to consulting with a doctor prior to any procedure you wish to take. Not doing your affordability check prior to placing a deposit for your home purchase may cost you to forfeit your deposit. To avoid wasting your money, we strongly encourage everyone to do a thorough budget planning.
How To Find Property Agents In Hong Kong?
After knowing how much you can borrow from the bank and how much down payment you can afford, you can start to identify the right property agent who can assist you throughout the whole home purchasing process. However, you should know that there are over 40,000 licensed agents in Hong Kong and majority of these agents are working under the big 3 agencies:
- Centaline Property Agency Limited
- Midland Realty International Limited
- Ricacorp Properties Limited
The big 3 agencies have greater scale and market coverage, but they are more traditional in terms of their marketing strategy. Therefore, inspired a few new players such as Okay.com, Spacious and Habitat Properties, to name a few, to participate in the market in recent years. While the new players are smaller in scale, their approach tends to be more expat focused, hence a great option for expats looking to buying a home in Hong Kong.
While there are many agents in the market, our experience shows the best way to find a reliable agent is through friends and family referral. Having said that, we also want to remind you what fits for others might not fit for you. Engaging with various agents and finding one that understands and matches you is the most important. This process might take 2-3 weeks. But again, buying a home is one of the biggest decision you can make, so it is better to treat it with caution.
Do note that while Hong Kong isn’t as large of a city as London or Los Angeles, it’s likely that real estate agents are not familiar with every area or corner of Hong Kong, especially for those agents who have relatively less experience. It’s a good idea to understand what area you are looking for and find agents who specialize in those areas. Not to worry if you haven’t narrowed down a specific area yet, you can reach out to multiple agents at once in order to gauge your interest.
How much do you need to purchase a property in Hong Kong?
As we mentioned earlier, budget planning is the first and most important step on your home purchase journey. In order to purchase a property in Hong Kong, you must first know how much you need:
How much down payment you need depends on how much mortgage you can borrow. But how much you can borrow depends on many factors such as, property type, property value, your income status etc. To make things easier for you, you can simply fill out our mortgage assessment form to find out how much you can borrow or how much of a property you can afford to buy. If you wish to dig deep into the details, simply read our Guide on How To Get A Mortgage in Hong Kong. If you already know how much you can afford you want to get the best possible mortgage interest rate or offer, click the attached link. In a nut shell, Hong Kong Monetary Authority allows up to 90% mortgage for properties priced up to HK$19.2m. Meaning, the minimum down payment you need to purchase any private residential property in Hong Kong is 10%.
HKMC Mortgage Insurance
For those who wish to borrow a mortgage with a sum exceeding 50%-60% (depending on the situation) of the property value will be required to purchase mortgage insurance. Generally speaking, the mortgage insurance premium ranges approximately from 1%-5% of the loan amount. While this can amount to a significant amount of money, don’t worry, banks will usually add this sum to the mortgage and help you pay it off in one lump sum. So basically, you don’t need to pay a single dime up front.
Usually, fire Insurance is an insurance policy that covers the damage inflicted on the structure of the property due to natural disaster. This will protect banks and financial institutions on the cost needed to reinstate or restore the property back to its normal form. Fire insurance doesn’t cover any personal loss and the insurance premium costs approximately 0.03%-0.15%. Banks will usually provide free fire insurance for 6 months to 1 year and will automatically renew on subsequent years with a fee. Bank’s fire insurance premium are usually on the high end so it is better to source your own fire insurance policy and notify the bank ahead of time.
According to HKSAR Government, any sale and purchase or transfer of property will be required to pay stamp duty. There are 3 types of stamp duty:
- Ad Valorem Stamp Duty (AVD)
- Buyer’s Stamp Duty (BSD)
- Special Stamp Duty (SSD)
Ad Valorem Stamp Duty (AVD) Rates at Scale 2
If you are a Hong Kong Permanent Resident holding a valid permanent identity card, doesn’t own any other residential property in Hong Kong and purchasing a residential property in Hong Kong, you are subject to Ad Valorem Stamp Duty (AVD) Rates at Scale 2. However, if you don’t meet the above requirements, meaning you are not a HKPR or currently hold other residential property in Hong Kong, you will be subject to a 15% stamp duty on your residential property purchase. Scale 2 will also apply to any non-residential property purchase.
|Exceeds||Does not exceed|
|$2,000,000||$2,351,760||$100 + 10% of excess over $2,000,000|
|$3,000,000||$3,290,320||$45,000 + 10% of excess over $3,000,000|
|$4,000,000||$4,428,570||$90,000 + 10% of excess over $4,000,000|
|$6,000,000||$6,720,000||$180,000 + 10% of excess over $6,000,000|
|$20,000,000||$21,739,120||$750,000 + 10% of excess over $20,000,000|
Buyer’s Stamp Duty (BSD)
Buyer’s Stamp Duty (BSD) is payable on an agreement for sale or a conveyance on sale for the acquisition of any residential property executed on or after 27 October 2012, except where the purchaser or the transferee is a Hong Kong permanent resident (HKPR) acquiring the property on his/her own behalf (i.e. the person is both the legal and beneficial owner). In other words, any Hong Kong residential property purchased by a non-HKPR or registered company will be subject to a 15% stamp duty.
Special Stamp Duty (SSD)
To prevent any short term speculation in the property market, the HKSAR government implemented the Buyer’s Stamp Duty. Any sale of a property purchased within 3 years will be subject to Buyer’s Stamp Duty.
|Holding period||The property was acquired|
on or after 27 October 2012
|6 months or less||20%|
|More than 6 months but for 12 months or less||15%|
|More than 12 months but for 36 months or less||10%|
Real Estate Agent’s Fee
Real estate agent’s fee are usually 0.5%-1% of the property transaction price.
Solicitor’s Legal Fee
Just like other parts of the world, getting a property in Hong Kong will require you to hire a solicitor to conduct all the legal documents and deal with the land registry. Typically, the solicitor’s fee for purchasing a property under HKD10m is approximately HK$10,000. The fee might increase if the property price increases.
Out of all the costs mentioned, renovation cost is the hardest to estimate considering how much work needs to be done and there are many variables that come into play. Generally speaking, renovation cost ranges from HKD600/sqft and up. For the most luxurious renovation, cost can go up to a few thousand dollars per sqft.
Total Cost/Budget In Buying A Property In Hong Kong
|Down Payment||Minimum 10% of property price|
|Mortgage Insurance||~1%-5% (lend by banks)|
|Stamp Duty||$100-4.25% (assuming HKPR and no other residential property)|
|Renovation Cost||HKD600/sqft and up|
What Other Cost Do I Have After Purchasing The Property In Hong Kong?
There are some other essential cost home owners must bear after buying a home in Hong Kong:
- Management Fee – Whether you are planning to self-use or rent out the residential property you just purchased, you will need to bear the monthly management fee. Depending on the building and services provided, the management fee ranges approximately from $1/sqft – $4/sqft. For older residential properties such as tenement building (Tong Lau) management fees are usually on the lower end. Management fee for newer residential properties are usually more expensive considering they provide club house, swimming pool and other facilities.
- Utility Fees (ie. Water, Gas, Electric)
- Rates and Government Rent – All property owners in Hong Kong will have to pay the Rates and Government Rent. This fee is collected by the government on a quarterly basis. The fee for Rates is 5% of the estimated rental value of the property. The fee for the Government Rent is 3% of the estimated rental value of the property. The estimated rental value is an estimation by the government on how much rent the property can collect if the property is rented out for the year.
Getting a property in Hong Kong is definitely challenging and a big commitment financially. On the bright side, you have all the freedom to decorate your place and finally have a place to yourself. Happy house hunting and don’t forget to reach out to us if you have any other questions on the home purchasing or mortgage process.