Are you moving to Hong Kong? Looking to rent before you decide to get on the property ladder? We, at Engel and Voelkers, have put together a guide to help you navigate the rental process in Hong Kong, one of Asia’s most mature real estate markets
Real estate terminology in Hong Kong
Every real estate market around the world has its own terminology, and Hong Kong is no exception.
Unit of measurement
In Hong Kong, the accepted unit of measurement for residential property is square feet. If you are used to another measure, there exist several online calculators that can do the math for you or then our knowledgeable agents can easily help you with the calculations.
Gross Floor Area and Saleable area
Real estate listings in Hong Kong typically mention dimensions as Gross Floor Area and Saleable Area.
The gross floor area is the sum of the total area of the property under consideration and a proportion of the development’s common areas such as lobbies, stairwells, gyms, function rooms and so forth.
The saleable area refers to the actual living space contained within the property and doesn’t include outdoor spaces such as roof tops, terraces, gardens, etc.
This saleable area makes up 65 to 90% of the Gross Floor Area. Older dwellings in Hong Kong feature a higher efficiency ratio than newer facility-laden developments.
Inclusive and exclusive rentals
Rents in Hong Kong are quoted as inclusive or exclusive. An inclusive rental as the name suggests includes government rates and management fees paid monthly. Management fees refer to communal charges, which cover the day-to-day maintenance and administration of the building. Professional management companies manage most buildings in Hong Kong, and their fees amount to 10-15% of the rental amount. Management fees are dependent on various factors such as the age of the development, number of units in the development, the facilities available and the gross area of the development. The government rates are fees levied by the government quarterly.
Individual landlords usually offer inclusive rentals while corporate landlords typically put forth exclusive rental quotes. Hence when faced with an exclusive rental you need to factor an additional 10-15% in your monthly rental amount.
Rental amounts are also affected by factors like floor height and proximity to transport, apartments on higher floors, developments situated close to MTR stations and other facilities often command a premium.
Choosing the right real estate agent (realtor)
The real estate industry in Hong Kong is quite buoyant for real estate is a prized asset class in the HKSAR. Moreover as an international hub for business, Hong Kong is home to a transient population. The demand for housing is perennial as a result; realtors have a presence in every nook and cranny of Hong Kong. However, all real estate agents are not the same, and if you would rather go with an established firm with a long-standing reputation across boundaries, you need to look no further than Engel and Voelkers Hong Kong.
Choice of dwellings
Hong Kong offers a wide choice of real estate options- colonial-style apartments, Chinese walk-ups, serviced apartments, full-service new developments, village houses, villas and even houseboats. These dwellings are available all over Hong Kong, on Hong Kong Island, the Kowloon Peninsula and the New Territories.
Several factors govern a house search in Hong Kong. Your budget, the proximity to public transport, your place of work or your children’s school and the surrounding environment are the most common factors that determine a search for a suitable residence. Once you have worked out your needs, any of our experienced, multilingual agents can help you identify your ideal home in Hong Kong.
Various types of landlords populate the real estate market in Hong Kong.
These landlords typically own the entire development. They usually have a leasing team to handle their rentals, and their terms and requirements are usually quite rigid. Corporate landlords however ensure that their properties are maintained to a standard as they have a regular rotation of tenants.
An individual landlord may own one or two units around the city and is often more amenable than a corporate landlord.
Investor landlords usually own several units around the city. They may or may not live in Hong Kong and but participate in the Hong Kong real estate market for profit. They are more likely than corporate or individual landlords to sell an occupied tenanted property if the market is very ‘hot’. Our agents can help you to format a rental contract to protect your tenancy terms in the light of such circumstances.
As companies compel expats to go ‘local,’ they encourage employees to sign their own lease agreements. Personal leases are widely accepted in Hong Kong though some corporate/developer landlords ask for a higher security deposit usually equivalent to three months rent. If a company provides an employee with housing, the company usually signs the rental lease on behalf of its employee. However, the employee is responsible for the terms of the lease agreement and has to make good any damage at the end of the lease.
The worthiness of a tenant
This condition is relevant for personal leases. Landlords want to be sure that they are entrusting their valuable asset to a tenant who has stable employment and can pay the rent. They often ask for the tenant’s visiting card or a letter from the employer. Our agents are happy to hand over such documents to the landlord for you.
Once you have decided on a property, before any money is handed over, or any contract is signed, we conduct a land search to determine whether the landlord can lease out the property concerned. Such searches will confirm the legal name of the owner or company, if there is a mortgage on the property, whether the landlord has the consent of the bank to lease it out, etc. In Hong Kong, banks advance mortgages only if the borrower intends to occupy the property.
If the borrower intends to lease the property, he/she needs the bank’s consent to do so, for if the borrower defaults, the bank can ask the tenant to vacate with immediate effect. Banks don’t usually allow individual borrowers to lease out their property.
Most folk love to bargain and Hong Kong landlords and tenants are no exceptions. Prevailing market conditions determine whether the tenants can drive a hard bargain while negotiating the rental price with the landlord. At Engel and Voelkers, our experienced team of agents is capable of navigating the tricky negotiating process in the best interests of all parties concerned. Aside from the price, the negotiation process can also include requests from the tenants for kitchen appliances (microwaves, refrigerators, washer/dryers) or soft furnishings (curtains and blinds).
In a sizzling rental market, when desirable properties are being snapped up quickly, our agents may advise submitting an offer letter confirming your interest to the landlord. This interim document lists details about the tenant and the landlord along with specifics such as the address of the property, the amount of rental and duration, deposits payable, agency fees and so forth. The letter may also mention the decorations the landlord needs to carry out before the rental commences. When the landlord signs such an offer letter, you expected to tender a holding deposit equivalent to one month’s rent. If either the landlord or tenant, decide not to proceed with the tenancy, the landlord has to return the full deposit to the tenant.
Furnished and unfurnished properties
The majority of properties in Hong Kong are offered for rent unfurnished. Older properties are often leased out without seemingly ‘essential’ kitchen appliances like cookers, microwaves, fridges, washer/dryers and dishwashers. Chinese cooking doesn’t normally require the use of an oven so finding an installation of an oven is often a rarity. However, newer properties nowadays usually have fully fitted kitchens with appliances from topnotch brands like Miele, Gaggneau, Siemens, etc.
Landlords usually assume responsibility for most structural fixtures at the tenanted properties but more often than not the tenant to pay for repairs and maintenance of expensive fittings like air-conditioners. At new complexes, the developers of the complextypically offer a warranty period of a year or two for installed appliances.
Properties in Hong Kong are usually offered for rent with telecom, Internet, gas and electric connections installed and ready for use. As soon as the tenant moves in, he/she needs to transfer the billing of these utilities to his/her name. At Engel and Voelkers, our agents are familiar with such transfers and are more than willing to aid you with this process.
It is customary for individual landlords in Hong Kong to ask for a deposit equivalent to two month’s rent. Corporate landlords, however, tend to ask for a higher deposit account, equivalent to three month’s rental. Needless to add that no interest is payable on the deposit amount and at the end of the rental tenure, landlords often try to deduct wear and tear from the deposit amount. The tenant also needs to tender rent for the fist month immediately. Another common trait of landlords in Hong Kong is that they expect monthly rent to be deposited by Autopay into their bank accounts.
Rental contract/ lease agreement
A rental contract or lease agreement is a legally binding, contractual agreement between the landlord and the tenant. The agreement itself is usually a standard two-page document, which lists the requirements of the tenancy. Lease agreements with corporate landlords are usually longer and more detailed and even can span more than fifty pages.
Usually the rental contract features major terms of the tenancy such as the duration, the rental amount, the deposit paid and the address of the property. The contracts further contain lists of restrictions and obligations for the tenant with respect to issues like subletting, damage, re-decoration, etc.
The Break Clause
This lease agreement usually extends over two years, while the first year of tenancy is fixed; the second year is more flexible and either the tenant or the landlord (individual landlords) can choose to end the lease without penalty after giving one or two month’s notice. The break clause can be thus invoked after fourteen months i.e. 12 months + two month’s notice.
This condition is usually written into the rental contract and is known as the ‘break clause.’ Corporate landlords are not as flexible and allow a lease to be terminated by the tenant only under unusual circumstances i.e. the tenant has to move to another country for work or if the person has resigned or has lost his job at the said company.
The agent’s commission is divided equally between the landlord and the tenant and is usually equivalent to one month’s rent.
The lease needs to be registered with the authorities before it is applicable. The landlord and the tenant divide the amount of stamp duty payable. At present, this amount is 0.5 % of the annual rent amount.
The end of a lease
At the end of a two-year lease period, the tenant needs to tender the apartment to the landlord (unless the tenant would like to stay on). Landlords conduct an inspection of the premises, and the tenants are expected to return the premises in the condition received.
If you have hung pictures on the walls, you need to remove hooks and patch the holes before the handover. After the inspection is complete, the landlord may decide to deduct charges for damage or wear or tear from the tenant’s refundable deposit.