Buying and Leasing Property
Hong Kong’s real estate market is one of the world’s most sought-after property destinations and if you are in the market of purchasing a new home – we have created a simple guide to buying property in Hong Kong.
General Procedure for Buying Property in Hong Kong
- Contact a property agent or directly with landlord to negotiate principal terms
- Sign a provisional agreement for sale and then pay a deposit of 3-5% of the asking price. If the property is subject to a mortgage, the deposit is collected by the seller’s solicitors as stakeholders; otherwise it is released to the seller.
- Provisional agreements in most cases are binding but either party is allowed to withdraw from the transaction but with a loss of the amount equal to the provisional deposit.
- Pay further deposit to total of 10% and sign a formal agreement within 14 days after signing provisional agreement. Payment is made to seller party and depending on whether the property is subject to a mortgage.
- Buyer will usually have a lawyer to investigate the title and agreement for sale – reviewing the title (requisitions)
- When all materials by seller and buyer are reviewed by lawyer, transaction is completed.
Payments – Buyer needs to pay the following:
- Own legal costs for dealing with the purchase
- Estate agent’s commission (usually 1% of the purchase price which is collected from buyer and seller)
- Stamp Duty
- Land Registration and search fees
- Company registration and search fees
- Insolvency search fees
Typically, the risk in the property transfers to the buyer as soon as the signing date of the provisional agreement – however the agreement can state otherwise. It is important to arrange insurance coverage for the property from the signing date.
Stamp duty is a payment relating to any property sale transactions at variable rates depending on the value of the transaction. In most cases, the buyer pays the stamp duty although the statutory obligation to pay is on both the seller and the buyer.
Leasing of property
- A new tenant can opt to lease apartments through a property agent or directly with the owner.
- Standard Hong Kong lease terms are two years long, with a ‘break-clause’ that is exercisable at the end of the first year by giving two months notice — meaning that the minimum occupancy will be 14 months. . In the second year, though, either the tenant or landlord can often choose to terminate the lease penalty-free by giving two months notice.
Leases generally fall under the following terms:
- Initial deposit of one months’ rental, payable upon execution of the Offer Letter and refundable in the event that the Tenancy Agreement is not executed.
- Security deposit of two to three months’ rental, payable upon execution of the Tenancy Agreement and refunded at the end of the Agreement term.
- Stamp Duty fees are 0.5% of the yearly rent plus 5HKD, which is shared equally by Landlord and Tenant.
- Real estate agency fee of one month’s rental, shared equally between the landlord and tenant.
- Rental payments are paid according to the date set within tenancy agreement
- Rental contract is usually reviewed every 2-3 years to current market rental levels
- Tenant is required to pay government rates
- Tenant pays for all charges for water, electricity, and gas charges
- Limited sub-letting options
- Tenant must seek landlords written consent to install or alter any fixture or partition
- Tenant insures public liability
- Wide tenant’s indemnities to the landlord
- Before the termination of the tenancy agreement (usually three months), landlord is allowed to show the property within reasonable time to prospective tenants and purchasers
- Agency fees may apply (if gone through an agency) and is 50% of one month’s total rent which is the standard fee throughout Hong Kong among all agencies. This is payable upon signing of the Tenancy Agreement.
- option to break or renew contract may be granted for larger lettings
* terms are negotiable with landlord