Property Conveyancing in Hong Kong
Practice
Buying Property in Hong Kong: A Step-by-Step Guide
Buying property in Hong Kong involves several stages, significant costs, and strict regulatory requirements. Understanding each stage helps you avoid costly mistakes and protect your interests.
Step 1: Pre-purchase enquiries and searches. Before making an offer, conduct searches with the Land Registry to verify the seller’s ownership and check for any encumbrances (mortgages, restrictive covenants, or easements). Hire a surveyor to inspect the property and identify structural or building defects. Arrange finance and obtain a mortgage commitment letter from your bank. Non-permanent residents (those without Hong Kong Permanent Residency status) face additional restrictions and may be subject to the Non-Hong Kong Resident tax on property sales.
Step 2: Making an offer and signing the Preliminary Agreement. Once you decide to proceed, you and the seller sign a Provisional Agreement under the Conveyancing and Property Ordinance (Cap. 219). The provisional agreement sets out the sale price, the property description, the deposit amount (typically 5-10% of the purchase price), and the completion date. You pay the deposit (which is held in an estate agent’s or lawyer’s trust account) and have a cooling-off period (typically 5 days) to reconsider.
Step 3: Signing the Formal Agreement. After the cooling-off period expires, you and the seller sign the Formal Agreement (or “Agreement for Sale and Purchase”). This is the binding contract under Cap. 219 and sets out all the terms of the sale, including the price, the property description, the condition of the property, the chattels (moveable goods) included in the sale, the completion date, and any special conditions (such as the seller’s obligation to obtain a Deed of Mutual Covenant from the property’s Owners’ Corporation).
Step 4: Survey and defects report. You (the buyer) pay for a professional survey. The surveyor inspects the property and reports on structural condition, building defects, and maintenance issues. If major defects are found, you may be able to renegotiate the price or withdraw (depending on the terms of the agreement).
Step 5: Handling stamp duty and other costs. Stamp duty is payable on the transfer of property under the Stamp Duty Ordinance (Cap. 117). Rates are: for purchases up to HK$3 million, 1.5% ad valorem stamp duty applies; above HK$3 million, rates increase to 3%-4.25% depending on the price. Additionally, non-permanent residents face a 15% Buyer’s Stamp Duty (BSD) on purchases above HK$3 million, and owners of multiple properties face Special Stamp Duty (SSD) — 20% for purchases sold within 6 months, 15% within 12 months, 10% within 24 months, and 5% within 36 months. Your lawyer manages stamp duty payment and registration.
Step 6: Completion. On the completion date, you pay the remaining purchase price to the seller (less the deposit already paid). The seller’s lawyer transfers the property to you and provides the title deed. You obtain a copy of the registered Deed of Mutual Covenant (DMC) if the property is in a building with an Owners’ Corporation. Your lawyer registers the property transfer with the Land Registry under the Land Registration Ordinance (Cap. 128).
Step 7: Post-completion. After completion, you are the legal owner of the property. Arrange for electricity and water connections, update the tenant register (if renting the property), and ensure building and contents insurance are in place.
Understanding Stamp Duty on Property Transactions
Stamp duty is a significant cost in property transactions in Hong Kong. Understanding the rates and when duty is payable helps you budget accurately.
Ad valorem stamp duty: This is the main stamp duty on property transfers, calculated as a percentage of the purchase price. Current rates are: HK$0-HK$3 million: 1.5% (rounded up to the nearest HK$100). HK$3 million-HK$4.5 million: 3%. HK$4.5 million-HK$20 million: 3.75%. Above HK$20 million: 4.25%.
Buyer’s Stamp Duty (BSD): Non-permanent residents (those without Hong Kong Permanent Residency) face a 15% BSD on residential properties purchased for more than HK$3 million (or any price for some non-residents). Permanent residents purchasing a second or subsequent residential property face a 15% BSD. Companies and trusts also face BSD at 15% on residential properties. BSD is in addition to ad valorem stamp duty.
Special Stamp Duty (SSD): Owners who sell property within a specified holding period face SSD: 20% if sold within 6 months, 15% within 12 months, 10% within 24 months, 5% within 36 months. SSD does not apply if the property was inherited or if the owner is a first-time buyer. SSD applies only to the seller, not the buyer.
Stamp duty is paid by both buyer and seller (or as they agree) and must be paid within a specified time or the transaction is not registered. Failure to pay stamp duty results in penalties and prevents registration of the property transfer.
TITUS advises on stamp duty implications of property transactions and manages the stamp duty payment process.
SEE WHAT’S BEST FOR YOU
FAQ
FAQ SECTION
What is the cooling-off period when buying property in Hong Kong?
After signing a Provisional Agreement under the Conveyancing and Property Ordinance (Cap. 219), you have a 5-day cooling-off period to reconsider and withdraw without penalty. The cooling-off period is calculated from the day after signing the provisional agreement. If you withdraw during the cooling-off period, you forfeit the deposit (unless the seller consents to a refund). After the cooling-off period expires, the contract is binding and you cannot withdraw without breaching the contract.
Who pays stamp duty when buying property in Hong Kong?
Both buyer and seller must pay stamp duty under the Stamp Duty Ordinance (Cap. 117), unless they agree otherwise in the contract. The buyer typically pays ad valorem stamp duty (1.5%-4.25% depending on price), and the seller pays Special Stamp Duty if applicable (20% if sold within 6 months, 15% within 12 months, 10% within 24 months, 5% within 36 months). Non-permanent residents also face Buyer's Stamp Duty at 15% on properties above HK$3 million.
What is the difference between a Provisional Agreement and a Formal Agreement?
A Provisional Agreement is the initial non-binding offer signed after you and the seller agree on terms. It sets out the basic price, property, deposit, and completion date and includes a 5-day cooling-off period. A Formal Agreement (or "Agreement for Sale and Purchase") is the binding contract signed after the cooling-off period expires and includes full terms and conditions, chattels (moveable goods included), and special conditions. Once you sign the Formal Agreement, you are legally bound to complete the purchase.
What is a Deed of Mutual Covenant (DMC) and am I obliged to comply with it?
A Deed of Mutual Covenant (DMC) is a registered document that sets out the rights and obligations of owners in a building with multiple units. It covers common areas, maintenance obligations, building management, utility charges, and restrictions on use. All owners are bound by the DMC as if they had signed it personally. Failure to comply with the DMC can result in enforcement action by the Owners' Corporation, including court action and an order to comply with (or pay damages for breach of) the DMC.
What is Special Stamp Duty (SSD) and when does it apply?
Special Stamp Duty (SSD) is a stamp duty imposed on sellers of residential property who sell within a specified holding period (20% if sold within 6 months, 15% within 12 months, 10% within 24 months, 5% within 36 months). SSD is calculated on the sale price and is in addition to ad valorem stamp duty. SSD does not apply if the property was inherited or if the seller is a first-time buyer. Non-permanent residents and corporate owners generally cannot avoid SSD.
What happens if a property lease expires?
All land in Hong Kong is held on lease from the government (typically 99 years, renewable for another 99 years). When a lease expires, the property reverts to the government. As a lease approaches expiry (typically when 80 years or fewer remain), the property value declines. Most property owners can apply to the government for a lease extension (a "new grant") that extends the lease for a further term, but this requires payment of a land premium (the market value of the extension). Leases with less than 50 years remaining become difficult to sell or mortgage.
What mortgage percentage can I borrow when buying property in Hong Kong?
Most banks offer mortgages up to 80% of the property value for owner-occupied residential properties (up to 90% for properties below HK$5 million in some cases). Investment properties typically 60%-70%, and commercial properties 50%-60%. Non-permanent residents, foreign buyers, and owners of multiple properties face stricter requirements and lower loan-to-value ratios. Your bank will assess your income, credit history, and the property value and will set your maximum loan amount.
What is the Residential Properties (First-hand Sales) Ordinance?
The Residential Properties (First-hand Sales) Ordinance (Cap. 621) applies to the sale of new residential properties from developers (first-hand sales). It requires developers to register developments with the government and provide buyers with clear information about the property and their rights. Cap. 621 gives buyers a 5-day cooling-off period, requires the developer to hold deposits in trust accounts, and prohibits unfair practices such as misrepresentation or forced bundling. Developers are also required to repair defects discovered within 24 months of completion.