So you’ve found a Hong Kong property that caught your eye. What exactly do you do next? Whether you’re a foreigner moving to Hong Kong or simply a foreign national searching for an overseas property investment, it’s important to know the fine details of investing in a property in Hong Kong before taking the plunge.
The General Rule for Foreigners
Generally, there are no restrictions for foreigners who want to buy a property in Hong Kong such as condominium units. The law even permits them to rent it out. However, not all foreigners enjoy the same freedom. For instance, Hong Kong is not open to foreigners from Afghanistan, Albania, Cuba, North Korea and mainland China. In the latter’s case, Chinese from the mainland can buy a Hong Kong property as long as they are permanent residents in another country.
While most foreigners can easily invest in a condominium unit, buying land is much harder. According to the Land Tenure System and Land Policy in Hong Kong, “virtually all land in Hong Kong is leased or otherwise held from the Government of the HKSAR.” Since 1841, land on Hong Kong Island has been sold to private purchasers.
With this, is there actually a freehold property on Hong Kong Island? The answer is yes. However, the only freehold land in Hong Kong is the site of St. John’s Cathedral. It’s located at 4 Garden Road, Central. Besides this site as the exception, the government has ownership of all other land. Meanwhile, The Global Property Guide reports that “land tenure is on a renewable leasehold basis.”
The Costs Involved
With Hong Kong property prices on the upswing, what additional costs should you watch out for? In a South China Morning Post article, those without a permanent Hong Kong identity card “are liable to pay twice the standard stamp duty rate.” In general, it starts at 1.5% for purchases not exceeding HKD2 million and can go as high as 8.5% if the Hong Kong property exceeds HKD21,739,130.
In an effort to cool off the market in 2012, a 15% buyer’s stamp duty (BSD) was required from foreigners buying properties in Hong Kong. The BSD imposed at 15% only applies to expats without a permanent resident’s card. However, it should be noted that if the foreign buyer’s spouse is a permanent Hong Kong resident, the BSD doesn’t apply. Correspondingly, there must be evidence of lawful marriage.
The Buying Process
Assuming you are investing in real estate in Hong Kong with the help of an agent, the buying process is typically as follows:
- The buyer identifies a Hong Kong property.
- The buyer’s real estate agent in Hong Kong helps negotiate price with seller or for new developments, with the Hong Kong property developer.
- The buyer’s solicitor reviews the Provisional Agreement for Sale and Purchase prepared by seller’s solicitor.
- Once the Provisional Agreement for Sale and Purchase is signed, the buyer pays 2 to 5% of the purchase price as initial deposit.
- After 14 days, the Sale & Purchase Agreement is signed. Then, the buyer will have to pay the remaining 10% of the property’s price minus the initial deposit.
- The real estate purchase transaction has to be completed within six weeks of the signing of the provisional agreement.
- At the closing, buyer needs to submit the balance amount of the purchase price to the seller.
- Once deal is done, the buyer is accountable to pay the relevant stamp duty and arrange for the registration of the purchase document with the land registry.
Was this article helpful? Visit the Yazhou Property blog to learn more about overseas buying or discover more info about Asia properties you are eyeing.
- Tips for foreigners buying property in Hong Kong
- Which locations should foreigners consider when buying Hong Kong properties?
- Why your next overseas property investment should be in Hong Kong
- How to finance your property investment in Hong Kong