Buying property in Hong Kong

There have been many changes to Hong Kong over the last decade, with the 1997 agreement to transfer sovereignty of the colony to China the major event of late.  Currently classed as one of two “special administration regions”, Hong Kong has autonomy to create and change its own laws until 2047, although China is currently responsible for the protection of the colony and foreign affairs.

Initially there was concern about the hand over to China, but there have been no adverse events as yet.  The country is still thriving as one of the main financial centers of the Far East, with many viewing the country as a place where East meets West, and the various cultures cross over and mix.  It is perhaps one of the truest capitalist economies in the world, with low taxation and no government intervention.

The country has been an immigration target for many years and has a massive European contingent, with substantial Australians, Canadians and Japanese. Since the hand over to China, the country is also receiving a large number of Expats living in Hong Kong including some 45,000 Chinese nationals a year.

While not the biggest country in size, Hong Kong has one of the most influential economies in the Far East.  A very popular stopping place for Westerners, the country has also attracted a great many overseas offices for some of the major companies of the world.  Initial worries about the hand over seem over done, and in all honesty, why would China change the workings of a colony which works, and which has the potential to bring in much need trade and employment?

The city also has not been immune to the effects of the global financial crisis and this is most seen in the sudden drop in property valuations across this financial giant. The market in Hong Kong though has been on the up and up as it has been on a steady road to recovery mainly due to large investments made on bargain basement real estate developments.

Contents: Property Market Performance in Hong Kong | Property Costs in Hong Kong

Property Market Performance in Hong Kong

While there is no problem buying a property in Hong Kong, you may have problems arranging a local mortgage.  Prices are sky high due to the fact that there is very little property on the open market, and what is there will be squeezed up to crazy prices – sellers are there but at a price.  Nearly half of Hong Kong’s residents live in government housing, which has taken some potential buyers out of an already over heated market, and also used up property which may have entered the commercial property market at some stage.

Some properties within the centre of the business sector are going for something in the region of $4,000 a square foot, a massive increase on 10 years ago. Many experts are forecasting property price increases in the region of 10% between 2007 and 2008, which is probably a reflection of the continuing progression of the Hong Kong economy which still continues to function well side by side with China. As of 2009, Hong Kong has returned to its status as having one of the most expensive real estate sectors in the world, both for the commercial and residential real estate.

On a cautious note, the Far East is not without localized economic concerns, with the Japanese and Chinese economies being mentioned by many as due for a slowdown.  Both economies have performed well over the last few years, and China in particular seems to be booming – with some observers concerned that the boom may get out of control.  Any problems will have an effect on the Hong Kong property sector, and while there is value to be had on a long term basis, short term fluctuations should be expected.

Property Costs in Hong Kong

The Hong Kong system of property transactions is based on the UK version (another example of past British rule) with costs including :

• A Deposit of 5% payable on agreement in principle, and another 5% two weeks later.
• Broker fees of between 0.5% and 1% of the price.
• Lawyers fees, generally in the region of $6,000.
• Stamp duty, anywhere between 0.75% and 3.75% of the purchase price.

For those able to arrange a mortgage, they generally cover only 70% of the property price, with the balance to be raised from elsewhere.

The basic process in property sales include the engagement of a property agent who performs due diligence, price comparison and negotiates for the final price for and on your behalf. All the transfer documentation can be completed within two to three weeks. If you are in the market to purchase, an expat provided the following advice at the Hong Kong Expat Forum last September 11, 2008:

At these locations one really needs to pound the pavement and see the flats/houses and properties available for sale from the various agents. Agency websites in these areas are not too popular. In Discovery Bay and Tung Chung there are some of the bigger agencies like Centaline and Midland. But it seems the real areas you want are smaller independent agencies.

Related Posts

1. Retiring to Hong Kong
2. Potential for expats increasing in Hong Kong financial jobs market
3. Thinking of a move to Hong Kong?
4. Hong Kong Country Guide
5. Moving To Hong Kong

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