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Blog | April 25, 2023
In recent years, there has been a rising trend of buying pre-sale properties. Eye-catching figures such as number of subscriptions, registration of intent and lots-drawing for flat selection priority hit the headline almost every day.
These jargons can be a bit overwhelming for first-time homebuyers. What do they actually mean? What is the process for buying an off-plan property ? In this article, Spacious will provide a complete guide to buying a pre-sale property in Hong Kong.
Table of Contents
First, calculate the total expenditure of buying a property. Then, compare and inquire about mortgage plans from different banks or loan institutions. Evaluate your financial situation and determine which price range of property is affordable.
The expenses of a first-hand property are usually easier to calculate because many miscellaneous fees are paid by the developer, such as lawyer fee, agency commission, and even part of the stamp duty.
If the buyer chooses the stage payment mortgage plan, they should remember to apply for the mortgage three months before the handover of the property.
For a quick calculation, use Spacious’ mortgage calculator to figure out the total monthly repayment needed for your desired property.
At least 7 days before the sale date, the developer will upload the sales brochure of the new development on the official website.
The sales brochure contains detailed information about the property, such as bird’s eye view, payment incentives, number of units for sale, floor plans, layouts, gross floor area, saleable area and use of materials.
You must read the sales brochure carefully and choose the unit with the best orientation, view, and other conditions that suit your preferences.
At least 3 days before the sale date, the developer must publish the price lists and sales arrangement.
The developer may break down the sale into several price lists based on the popularity of the development and market response in order to adjust prices accordingly.
In the past, some developers have delayed the sale to manipulate the supply of units in a way to push up prices. The authority subsequently introduced regulations. For new developments with 100 units or more, the first price list must include at least 20% of the total units, and each subsequent list must have at least 10% of the total.
The sales arrangement will specify the method of subscribing to units, including pre-sale methods (such as registration of intent or tender), dates, times, and locations, as well as the number of units for sale.
Shortly after the price list is released, the developer will open show flats for public viewing, usually with both renovated and un-renovated units. Prospective buyers can register their interest right at the sales office, also known as registration of intent.
The buyers should bring a cashier’s order or a cheque with a value of at least HK$ 100,000 as a deposit. The deposit will be deducted from the initial deposit when the Provisional Sale and Purchase Agreement is signed.
Some developers may limit each person or group to only 2-3 entries of registration, while others may have no limit. For buyers wishing to get higher priority of selecting units, they may register multiple cashier’s orders.
One or two days before the sale, developers will draw lots to determine the order of selection among all registered buyers.
On the day of sale, the sales office is usually divided into a registration area, a ballot area, a waiting area for unit selection, a unit selection area, a waiting area for signing contracts and a contract signing area.
The sales office will display a unit consumption table in a prominent location, giving an overview of the available units for selection, the units that have signed provisional sale and purchase agreements, and the units that have been selected but have not yet signed provisional sale and purchase agreements.
Some real estate agents may submit cashier’s orders for prospective buyers. Prospective buyers should be aware that this may violate the Residential Properties (First-hand Sales) Ordinance, and agents may be penalised and imprisoned.
However, there is a legal loophole when it comes to payment. The would-be buyer may initially transfer money to the agent via credit payment, but the payment will not be transacted yet.
The agent will then issue the cashier’s order on their behalf. The credit payment is only made to the agent when the buyer is able to select his desired units. In other words, the buyer will not actually spend any money until they buy.
After selecting a unit, the buyer and the developer will enter into to sign a provisional sales and purchase agreement with the developer. At this stage, the buyer prepares an initial deposit (also known as a “provisional deposit”), which typically amounts to 3% – 5% of the property price. If the buyer changes his mind after signing the provisional agreement and does not complete the transaction, the deposit will be forfeited.
The buyer can choose either “cash payment” or “stage payment” option and apply for a mortgage from the bank with the provisional sale and purchase agreement. It is worth noting that the mortgage insurance plan is only available to pre-sale buyers choosing the stage payment. Buyers of completed new properties are already eligible for the new mortgage insurance plan.
Within 5 working days after signing the provisional agreement, both parties need to sign the formal sale and purchase agreement. The buyer needs to pay further deposit (i.e. typically 10% of the unit price in total) and also settle the stamp duty and lawyer fees.
Within 14 days before the handover, the buyer must complete all the necessary procedures with the developer. A confirmation letter will be sent to the buyer through a law firm to inform the handover date.
When handling the transaction, the buyer needs to prepare sufficient budgets to pay for the building plan fee, the first month’s management fee, three months of management fee deposit, equipment fund equal to two months of management fee, and debris removal charges equal to one month of management fee, etc. The total expenditure can often reach a five-figure sum.
Finally, the move-in day has come. Some buyers with a tight budget choose to inspect the unit themselves, while others may seek the help of a professional inspector. Inspectors usually charge by square footage; the larger the unit, the more expensive the fee.
If you decide to inspect the property yourself, make sure to do your homework before the handover. Learn how to inspect the property online, such as checking if water drainage works properly, if the floor is level, if the skirting board is blackened (indicating water seepage), and if there are gaps in the door. The most important thing is to bring a stack of colorful memo paper, and simply write down the problems that need to be addressed (e.g., “crack” for a wall crack) where you think there is a leak.
On the day of handover, the buyer goes to the handover office to complete the registration process. The buyer will receive the keys to the unit, homeowner’s manual, building and facility instruction manual and other documents.
If you do not stay in the unit to inspect it, the handover process usually takes about an hour. Depending on the developer, the inspection period can range from 1 to 7 days. Within this period, the buyer needs to report any defects in the unit to the developer. It generally takes one to several weeks for the developer to remedy those defects. The new owner can usually do a follow-up inspection within a month.
If you are searching for a property across different neighbourhoods, go to Spacious to discover a wealth of properties listed for sale.
The most accurate payment information will be displayed in the price lists provided by the developer. Real estate agencies generally produce a simplified version, but the developer’s price list should be the final reference.
It should be pyabale to the developer’s appointed law firm, and the information will be displayed in the developer’s sales arrangements.
