The Property Banks Buyers Guide to China
The
property buying process in Hong Kong is governed by the Conveyancing
and Property Ordinance which was first introduced in 1984; this
ordinance is based on English law and is therefore relatively
standard and straightforward for British and even American real
estate investors.
This article explains how to buy investment property in Hong Kong in
general terms; for a more specific and personal assessment of an
investor’s legal and financial liabilities, advice can be obtained
from a lawyer and estate agent in Hong Kong when the hunt begins for
real estate suitable for an investor’s objectives.
Hong Kong is unique in that all land belongs to the government;
those who buy property in Hong Kong actually buy an agreement or a
lease with the longest leases available being for 999 years.
According to the laws governing the real estate sector theoretically
anyone is entitled to own property in Hong Kong whether as an
individual or through a company structure. If a company wishes to
purchase a lease on property and conduct business in Hong Kong they
have to be registered at Hong Kong’s Companies Registry.
According to the Land Registration Ordinance all leases should be
listed at Hong Kong’s Land Registry office and searches can be
conducted there for a small fee; however it is still important for a
property buyer to have their lawyer conduct detailed title deed
searches to ensure all is in order with the property being offered
for sale.
The first stage in the property buying process in Hong Kong is to
find a lawyer and an estate agent to assist. Estate agents generally
charge a fee of 1% of a property’s value to both the vendor and the
purchaser if a sale proceeds to closure and a solicitor’s fees are
regulated by the Solicitors’ Costs Rules, however it is still
possible to negotiate a complete fee for the work they will do on
your behalf and this is the normal way of doing business.
Once the property investor has found an estate agent to assist them
they should detail their specific criteria and then view real estate
that matches their brief. If a mortgage will be required to make the
purchase this should be agreed in principal - there are a number of
banks in Hong Kong willing and able to lend money to overseas
property buyers although there is a general reluctance to lend money
on older properties. Mortgages are also listed at the Land Registry
office therefore it’s possible for the purchaser’s solicitor to find
out whether the property being sold already has a mortgage against
it and if it does, under the terms of the contract a specification
will be made that the mortgage will be paid off by the vendor as a
condition to the conclusion of the sale.
Once a suitable investment property has been found and the asking
price agreed upon it’s usual to sign a binding pre-contract and pay
a non-refundable deposit therefore before doing so the investor
should speak to their solicitor and take advice to avoid the loss of
any money. Once the pre-contract has been signed the buyer’s
solicitor will begin his searches and the vendor’s solicitor will
draw up the Sale and Purchase Agreement which has to be approved by
the buyer’s solicitor. Once this document has been approved and the
searches of the Land and Companies Registries have been concluded
satisfactorily the Agreement will be signed and the purchase deed
will be drawn up by the investor’s solicitor. This has to be
approved by the vendor’s solicitor before it is signed by all
parties and the money is released by the bank.
As soon as this agreement is signed the buyer becomes responsible
for the property in Hong Kojng in terms of needing to insure it and
it is often a stipulation of any mortgage to purchase that
insurances are in place before the money is actually released to the
vendor.
Finally, there are quite a few taxes, fees and charges that may be
payable during a property transaction in Hong Kong and as a number
of these change annually it’s wise to ask for a detailed breakdown
of likely costs from an estate agent before committing to buy
property in Hong Kong. The list of fees payable will likely include
all or some of the following: -
Estate agency fees - 1% of the property’s value
Solicitor’s fees - fixed by the Law Society of Hong Kong‘s
Solicitors’ Costs Rules but usually negotiable
Stamp duty - around 3% of the property’s value
Search costs
Land registration costs
Insurance
Quarterly rates
Property tax or profits tax
Mortgage arrangement fees
Property management fees