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Hong Kong - Property Legal Issues
Foreigners buying homes in Hong Kong who need financing usually find that they are able to finance only about 70% of the purchase price. Some banks might have programs that allow coverage of 95%, however, so it doesn’t hurt to shop around to see what is available. In addition to the purchase price, there is also an agent’s fee, typically around 1%, and other legal costs associated with buying a home. The bank will charge around 1% of your home's value as "insurance" for any mortgages greater than 70%. Without a mortgage covering 100% of the loan, it’s important to have upfront cash. This should be taken into consideration when buying property in Hong Kong, too.
Although most expats rent rather than buy, with low interest rates and sky-rocketing rents, it might make more financial sense to purchase a property to live in instead. Where this might not make financial sense is if your company is giving you a housing allowance that only includes the renting or leasing of a property. Those who are only planning on staying in Hong Kong for 1-2 years sometimes find that renting is more flexible. For those planning on staying 5 years or more than buying might be more lucrative.
Some banks place restrictions on what types of properties they will cover in a mortgage. For instance, although an older building might hold more potential and be more cost-effective, some banks won’t provide a mortgage for an older building that doesn’t possess an elevator. In addition, if the building is more than 60 years old then you’ll probably find that your mortgage term is shorter than it would be for a newer building.
Hong Kong does not have any restrictions regarding ownership of land by any individual or corporation unless there is a legal disability. The only additional additional formalities required for ownership of land by an overseas individual or corporation is the new stamp duty raise to 15% and if the corporation commences a business in Hong Kong it must register itself as such at the Companies Registry.
In a multi-owner building, every owner must share the land together with the exclusive right to use the particular unit they purchased to the exclusion of the other owners. A good example of this would be a high-rise building with multiple apartments. A Deed of Mutual Covenant usually governs this relationship between the owners. It provides for building management, rights of way, rights to services, meetings of owners, and restrictions and all owners are subject to the deed’s terms.
Real estate agents usually want buyers and sellers to enter into preliminary agreements. These then become binding upon signing with payment of non-returnable deposits. Getting legal advice from someone who understands the real estate industry is something that should be considered before signing anything. Most real estate agents charge commission to both the buyer and the seller. This is a low fee, however, and is negotiable.
Under Hong Kong law, the risk on property passes upon signing a binding agreement unless the parties agree to other terms. As a result, insurance should be considered very early on. At any rate, most banks require that home insurance is purchased before agreeing to a mortgage.