Searching for properties can be challenging in Hong Kong. With a few exceptions, all land in Hong Kong is owned by the government. Given the size of Hong Kong’s 7 million population and limited land allowed for development, property prices are often shocking to newcomers. The average family dwelling is a 400 square-feet small apartment and approximately 48% of Hong Kong’s population lives in assisted rental public housing estate or in housing subsidized by the government. With no choice but to develop upwards, the majority of Hong Kong lives in high-rise buildings. Those with generous housing budgets may be able to reside on rare plots of land assigned to town-house and single free-standing houses. Regardless of size, most homes provide at most 2-3 bedrooms. With many different types of apartments available on the market, you should pay attention to the important factors outlined below when renting property in Hong Kong.
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Property size is quoted in square feet and historically in terms of the “gross area” – this is the area of the apartment plus the apartment’s pro-rata portion of common areas (such as the lift lobby, building lobby, stairwells etc). Subtract 15-20% to get an idea of actual useable space. Starting in 2014, the government required real estate agencies to also quote the “saleable area”, also known as the “net area” – this is the actual size of the apartment, excluding the portion of common areas. Most units have official values for both, though a few (generally older) developments do not have an official saleable area and some of the newest developments only list saleable areas without reference to gross areas. Renters should be clear on the gross and net areas before making the decision to rent an apartment.
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Rental prices are quoted in HK$ per month and can vary widely depending on the location, size and attached facilities of the apartment. The more modern complexes can include a swimming pool, gym and clubhouse, tennis/squash courts and children’s playground. Most apartment unit rents are quoted on an “Inclusive” basis, which includes the cost of government rates (taxes) and management fees. Rents quoted on an “exclusive” basis do not include these additional costs and potential renters should factor this for total-cost comparisons.
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Long-term rental premises generally come unfurnished but are typically equipped with basic lighting, air-conditioners, water heaters (either gas or electric), a cooker, oven, refrigerator, washing machine and clothes dryer. If any of these are not installed in the unit, it may be negotiable as part of the tenancy agreement.
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Utility charges include gas, water, electricity and telephone line services. Gas, water and telephone lines are relatively inexpensive but electricity costs will be significant, especially in the summer due to the heavy use of air-conditioning. Other utilities include cable/broadband television and an internet connection.
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A Long-term Tenancy Agreement in Hong Kong is usually two years, although often a break clause gives the landlord and/or tenant the right to terminate after 12 months with a 2-3 months’ written notice. Each party bears its own legal fees and is responsible for half of the stamp duty (0.5% of the annual rental) and the real estate agency fee (1 month’s rental). The landlord is responsible for anything inclusive of rent and the tenant for matters exclusive of rent, including the maintenance of any major appliances supplied by the landlord.
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Deposits are usually equivalent to 3 months’ rent -- 1 month advance rental and 2 months’ security. The deposits are due on execution of the tenancy agreement. The security deposit is returned at the end of the occupancy if the premise is returned in good order. It is a good practice to document / photograph the apartment at handover (before moving in) and note any defects to avoid potential disputes over the deposit when the deposit is returned at the end of the tenancy. Your real estate agent should assist you in this.
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Payment of the monthly rental, management fee and any satellite television charges (if applicable) are due one month in advance. The tenant is also usually responsible for paying the government rates and rent (real estate taxes, typically 5% and 3% of the determined ratable value, respectively), which are due quarterly in arrears. Although these are the tenant’s legal responsibility, this is often included in the monthly rental (if quoted on an “Inclusive” basis), in which case the landlord undertakes the logistics of remitting the rates and rent to the government.
In general a long-term lease is for a period of two years and the monthly rental is exclusive of furniture, utilities, management fees and government fee. The following funds and ongoing costs are required from a prospective tenant signing a Tenancy Agreement:
1. Initial Deposit of one month’s rent, payable upon execution of the Offer Letter and refundable in the event that the Tenancy Agreement is not executed.
2. Security Deposit of two to three months’ rent, payable upon execution of the Tenancy Agreement and to be refunded at the end of the Tenancy.3. Stamp Duty equal to 0.5% of annual rental plus HK$5, shared equally by Landlord and Tenant.4. Real Estate Agency Fee of one month’s rental, shared equally by Landlord (50%) and Tenant (50%).5. Monthly Rental as expressed and according to the schedule set in the Tenancy Agreement.6. Management Fees that are payable monthly to the management company / incorporated owners of a building and cover the maintenance of public areas, security, waste disposal, and the like.7. Government Rates that are in essence a property tax and reflect an estimate of the annual rental value of the property, as determined by the Government on a designated date. These are also paid quarterly (at the same time as government rents are due) in advance and are currently 5% of the estimated annual rental value.8. Government Rent is currently 3% of the rateable value of the property and paid quarterly with the rates.As far as the government is concerned, both the owner and tenant are responsible for paying rents and rates, exactly how much depends on the terms of agreement made between them. In most cases the Landlord pays the government rent (Discovery Bay on Lantau Island is a notable exception) and the tenant pays the rates. The rates are sometimes included in the rent, in that they are added onto the basic rental rate, but should be taken into consideration when determining housing costs.
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Serviced Apartments are another good rental option in Hong Kong. For shorter-term housing there are a number of serviced apartment options, usually with a minimum lease term of one month and a maximum lease term of one year. These are furnished and monthly rental is generally inclusive of most fees and services – i.e. management fees, government rates and rents, utility charges and maid service (broadband internet service may be subject to additional costs). These solutions require a security deposit of 1-2 months. The flexibility provided by serviced apartments tends to be attractive to short-term tenants.
Renting a desirable property in Hong Kong is not an easy task and care should be taken on the numerous terms. We hope you find the above information useful. Should you have any further property questions, our team is always ready and willing to help you.
