I had mixed feelings about letting Sing to write about this topic. I wouldn’t want anyone to think we are showing off or think we are better than someone else as we just signed off the documents for our Hong Kong flat.
I bet many people are even luckier than us, no need to worry about the mortgage, but I know how others struggle to get money for the down payment. Until last October we were facing life as expats somewhere in Europe, but some miracle combined two of our promotions at work, salary increases and meeting with Momzilla to remind her good time we all had in Hong Kong.
After we all decided we THINK we can afford to go back in few years, Sing, Momzilla and myself did tons of researches, checked possibly every bank in Hong Kong and we hope that this knowledge can help anyone of you! Not only in case of Hong Kong, but any other place you consider to settle down! Within next few days it will also be available in Cantonese here – click click .
Sing’s tips on buying a property in Hong Kong!
This is the Hong Kong Husband again! This time I want to share with you about my experience of purchasing an apartment in Hong Kong before I forget the details. I just want to help out whoever that is interested in buying any properties to settle down in Hong Kong so you will have an idea of the whole situation.
First answer the below questions before rushing into making any decision.
- Why do you need to buy a property in Hong Kong? The reason we need an apartment is because our biggest goal in is to return to Hong Kong for good. Even at this moment I am still surprised that Paulina and I share the same feelings because Hong Kong is considered the least affordable place to live in the world. We see ourselves living and working in Hong Kong because as I mentioned in the last post that I have a Hong Kong stomach so only local food that can bring me the feeling of home. Also I have a need to go back and take care of mom(zilla – Paulina) since she is not young anymore (I bet she would be delighted reading this. Greatest Son Award goes to Sing! – Paulina) Don’t want to regret after missing the time to be with the people you are the closest with. So this gives me no excuse but to go back to Hong Kong for good.
- What apartment size do you want? “Too small” is common comments from foreign travelers about hotels in Hong Kong. In a place that every inch counts (7 million people for 1000 square km), this is a sad reality. A typical apartment in Hong Kong is around 400 sqft, the new ones can be even smaller so the developers can sell you a smaller studios for a relatively “cheaper” price, still talking about millions (BLOOD SUCKERS!). The trend is, smaller flat has high price per square foot because those are the most affordable ones for the locals. So now ask yourself if you can live in area that can be smaller than the demo rooms in IKEA.
- How far is your target property from public transportation? Do you still want to walk after a long day of work or after a sleepless night? Not to mention Hong Kong can be as hot as 32C degrees plus a fully loaded bus that has no place to sit! Believe or not, the proximity of public transportation has strong influence to the property price, and terminal station is considered as a selling point because no one wants to stand on an hour long trip bus from Tuen Mun to Central when all the seats are taken by people from the bus terminal!
- The last question which is most people’s deal breaker, can you afford buying the home you want in Hong Kong? I did not want to scare you but it takes over 18 years of an average person’s gross income to buy a place to live.
An average earning of a college graduate after working 1-2 years is around $13-15K HKD. So 18 years of incoming before considering promotion or inflation will give you around $3.2M. At this moment even $3.2M cash won’t give you a lot of choices because this amount is considered lower than the starters (上車盤) in the city area.
So ask yourself, do you really need to buy an apartment, it is a lifetime investment in this capitalist society. Some people I know who don’t want to be tied with a lifelong mortgage choose to rent or move to somewhere affordable because having a property is not a goal of their lives.
If you are still reading, that means you are somewhat convinced to fight for a home in this amazing place. Here are the real challenges:
- Down payment:
I think this topic is the most frustrating for most of the people. This basically means the entrance fee of this game. Depending on your savings you can do up to 90% mortgage if you are a first time buyer. Higher mortgage ratio means you end up paying a lot of interest but this really depending on how much saving you have. My recommendation is to keep some spare money in case of unexpected situations – see below for more!
- Mortgage stress test
Many people first think they can afford paying most of their income toward the mortgage payment. The Hong Kong Government says wait a minute, let’s see if you can pass the income stress test. Assuming you this is your first property in Hong Kong and that will be your primary home, you are then allowed to use 50% of your gross income to support the mortgage and upto 60% when the interest rate increases 3%. What it means is if you earn $15000 a month, if you somehow can afford 40% down payment, then you can afford a property worth $2.7M, but if you can only afford 10% down payment, then you can only purchase a $1.6M property.
Pay attention to the mortgage insurance if you plan to apply for a loan that is greater than 60% of the selling price. This insurance can be something like 100k depending on how you want to pay it.
- Stamp duty:
Since you are a first time buyer, you are not affected by those doubled stamp duty or buyer stamp duty, so here is a breakdown of the stamp duty based on the selling price.
So let’s say your apartment worth $3M, then you will be paying 45k stamp duty.
- Legal service fee
This part is pretty straight forward, you should expect something around $6000 for a normal transaction. You indeed can bargain with some solicitors but the rule of thumb is reputable the solicitor firm is always more expensive. My suggestion is don’t try to save too much here but this is where your money transfer to and a good solicitor can ensure the deal is closed in a timely and organized manner.
- Find the apartment you want!
Now you know your buying power so you can go hunt for your new home! From our experience, this is the hardest part in the whole process because it is the seller’s market right now, this means price increases rapidly and not many flats available on the market. The make it worse, agency websites are not telling the truth! In many situations the flats are either not available or we were told that the price is outdated. All agents want us to do is call them so they can give us a “real” update of the market, in most cases they price is higher than what you see, so be aware! Here are some website I use to get an idea of the apartment we want.
Centalink Property – One of the biggest chains in Hong Kong
Midland Realty – Another biggest chain
28hse.com – this website is like craigslist, people can advertise their apartments there.
Hong Kong Land Registry – this is the official way to pull up historical selling prices, good to find reference price for reason sales. You may also dig out the pictures from the above websites after you know the apartment complex.
The agent commission is generally 1% of the selling price but this again can be bargained (We can rent out Momzilla for a bubble tea – she managed to bargain 8,000 HKD from the commission and 12,000 HKD from the price of the flat – cheapness is in our blood.-Paulina)
- Property valuation:
Once you know the property address, you can then pick one of the major bank website and look for the valuation tool. You simple input the address of the property then the bank will tell you the value of the address. You have to watch out if the value of the property is lower than the actual selling price then the bank will only lend you the agreed % of the valuation price. Some people end up need to find more money to raise the down payment so need to do your homework in advance.
Don’t be bombarded by all the info above, I am here to make your life easier so Here is an example of all the costs of getting a $3M apartment, doing 80% mortgage at 30 years.
|Down payment (20% of 3M)||$600,000|
|Mortgage insurance (2.15% of 3M)||$64,500|
|Legal service fee||$6,000|
|Total onetime payment||$745,500|
|Mortgage monthly payment for the next 30 years||$9052 if the interest stays at 2.15% (Donald Trump is making it go up now!)|
So do you feel like being a slave of your home now? If you still want an apartment that means you have strong tie of this amazing city. In my opinion it is totally worth it because the energetic feeling that Hong Kong give you is indescribable!
I see comments from some of you that we should stay in Ireland, or just stay away from Hong Kong but as one author said ‘You can leave Hong Kong, but it will never leave you’.
I hope this post helps many of you who want to call Hong Kong your home.
Are you a property owner? What are your tips and advise on buying a property? Share your thoughts, experience and your city so we can exchange information!
And you if you have any more questions regarding purchasing of property in Hong Kong you can leave them in the comment section below or contact us via contact form, or send us an e-mail at firstname.lastname@example.org!