Hong Kong is an exciting market for property investors right now because the potential for the real estate sector in this Special Administrative Region of China is huge as Hong Kong fortunes are expected to rise in line with those of China.
The buying process in Hong Kong is based on the English system so is fairly straightforward in its approach.
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 999 years. 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 searches to ensure all is in order with the property being offered for sale.
Buying Process
- First you should 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 Solicitor’s 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 a suitable property has been found and the price agreed it’s usual to sign a binding pre-contract and pay a non-refundable deposit therefore 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 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 all parties sign it and the bank releases the money.
- As soon as this agreement is signed the buyer becomes responsible for the property in Hong Kong 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.
Costs
- 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
- Insurances
- Quarterly rates
- Property tax or profits tax
- Mortgage arrangement fees
- Property management fees
Investment Potential
This potential for property investment in Hong Kong is intensified by the fact that the development of residential and commercial property in Hong Kong is physically restricted by geographic area, by the fact that demand for new apartment accommodation annually outstrips supply already and because the number of new apartment developments started in recent years is down which will now lead to demand exceeding supply to the tune of an estimated 20,000 units per year for the next four years.
Analysis points to the fact that the property sector will enjoy growth of between five and twelve percent over the next twelve months and because the number of property developments started in Hong Kong in recent years has fallen dramatically following uncertainty after the British handover to China, demand for accommodation to let and buy will begin to exceed supply seriously within a year and lead to sharp property price and rental price increases.
This under supply is predicted to last for at least the next four years during which time property owners will be able to charge increasing rental fees and enjoy maximum asset capital appreciation. Throughout the same period Hong Kong is expected to continue to integrate further with China and to therefore be in the best position possible to benefit economically from China’s booming import and export market.
Real estate investors in Hong Kong currently have great choice and the potential for great yields, but according to expert economic opinion, they are about to enter an age of as yet unprecedented prosperity.
The city of Hong Kong is undoubtedly one of the most vibrant, intriguing and beautiful in the whole world. On the one hand Hong Kong is among the busiest, most affluent and fast paced cities worldwide, and on the other hand it offers visitors and residents an inimitable serene tranquility. The tall and imposing modern office blocks and incredible shopping malls give way to beautiful parks which are oases of calm and peace. And you often hear of cities or even countries offering an eclectic mix of eastern and western influences but Hong Kong is the ultimate embodiment of East meets West with the British colonial influence as strong as the ancient Chinese influence and both enhanced by the unique nature of Hong Kong.
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