Wednesday, March 16, 2011

Mui Wo FAQs - Property

In our spare time, we like to walk around the villages pretending we're Warren Buffet and pick out distressed assets (ie houses) we would love to buy.

So far, we have not agreed on one we both like - thank goodness because we don't have the money anyway.

I always go for the most unloved houses, the ones property agents would call , with fake enthusiasm in their voices, "original condition, ripe for renovation."

Buffalo Wilbur, being the non-DIY person that he is, always goes for the ones in best condition, all glass and aluminum, without a rust stain in sight.

It's a wonder we managed to agree long enough to plonk our money on our present place.

I often get people asking me, when they find out we live in Mui Wo, what are their options if they want to move there.

Renting is not a problem: If you don't like it, you can move when the year's up. But buying is a commitment, so more careful thought needs to be put into it.

Well, here's a short FAQ for potential buyers in Mui Wo:

What kind of property can I buy in Mui Wo?

"Normal" flats are the kind you see in the town itself. They're all housed in buildings not more then five stories high (there's a height restriction in town) and range from 200 to 800 sq ft. You can get a 70-90% mortgage on them, just like any other flat in Hong Kong. Check out the HKMC website for more info on 90% mortgages.
They're close to all the amenities. Drawbacks: Concrete everywhere (a friend once asked me: "What's the point of living so far out in Lantau if you're still surrounded by concrete?"), small spaces, close proximity to your neighbours.

Village houses are three stories high and up to 2,100 sq ft in total. They're usually divided into three flats (500-700 sq ft), with the ground floor having exclusive use of the garden and the second floor having private access to the roof. Everyone aspires to buy one but, be warned, though they look cheaper than the ones in town, you will need loads of cash for the downpayment (between 30 and 50% of the price). The big banks like HSBC and Hang Seng are only slowly getting used to the idea of giving mortgages for village houses and even the smaller ones like Wing Lung and Wing Hang may only give you a 50% mortgage.
Fresh air and wonderful views. More space for less cash. Drawback: Upkeep of the building is at the owners' expense so you better hope you get along well with your neighbours. And have you seen the snakes in Blogger 8's blog?

Buyer beware
Does the building have a lift? If not, it may be considered a "tong lau" (or old building) and not come under the same mortgage terms as a normal flat. We considered Amy Court, only to be told by the banks that that was considered a village house.

Is the vendor legally allowed to sell his house? There are such things as licensed houses, in which only the licensee is allowed to live there. You may be handing over the money and stand the risk of having the whole thing taken away from you. Some people have done a deal with the licensee (nudge, nudge, wink, wink) without any problems but we don't have that kind of risk appetite.

Lantau Link has a good summary of the places available.

Transaction prices?
Ricacorp and Centaline have latest Land Registry transaction records for the normal flats in town. For village houses, I'm afraid you have to ask the real estate agents or pop into Tom's Cafe for the latest gossip.

Do I need a mortgage broker?
Yes, if you need someone to take you through the intricacies of mortgage application in Hong Kong. No, if you are prepared to do some legwork. We found the ones recommended by our agent kept steering us towards a particular bank and were clueless (or pretended to be) about the rates for others. And they couldn't get us more favourable rates than the ones we were offered just by walking into the banks and talking to their officers direct.

It's amazing how fast buying property can be in Hong Kong. The whole procedure, from provisional contract to completion, takes only six to eight weeks.

Here's the breakdown:
  1. Check valuation. Banks will not lend above valuation so you may have to fork out the difference.
  2. Get bank to give you in principle approval. This will save you loads of sleepless nights worrying if you have to forego your deposit if you can't get the mortgage.
  3. Make offer. Wait for vendor to hum and haw and claim he prefers to rent out/sell to relative/sell his kid than take up offer. Be strong and you will prevail. This takes the longest time.
  4. Get lawyer. Sign a provisional/preliminary agreement for sale and purchase. Hand over 5-10% of price as deposit. Get your own lawyer, don't trust the "standard" S&P the agents will thrust on you. We managed to get our lawyer to put in a clause that all monies will be refunded if HKMC doesn't approve our application for mortgage insurance.
  5. Go to bank with provisional S&P to arrange mortgage. This will take anything from a fortnight to two months. Don't forget that if you back out now (eg can't get mortgage), you forfeit the 5-10%. That is why you need your own lawyer to look after your interests.
  6. In the meantime, your lawyer will ask you to inspect the property to make sure it is vacant possession/with tenant according to agreement.
  7. Lawyer will call you when bank has approved mortgage. Sign formal S&P, hand over the remaining 90-95%. Get the keys.

Hidden costs?
Don't think so. The whole process is quite transparent: 1% commission for estate agent, stamp duties according to price, lawyer's fees... There have been whispers of under-the-counter transactions for desirable flats but we never encountered any such problems.

Click on text for more on:
Mui Wo real estate agents

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