WHAT ARE THE COSTS INVOLVED IN RENTING A HONG KONG RESIDENTIAL PROPERTY?
What Are The Deposits Required?
Deposits for a standard 2 year Tenancy Agreement (3 month’s rental (Occasionally 4)):
1. Initial Holding Deposit =1 month’s rental
After negotiation and then acceptance of all of the terms by both parties, an initial holding deposit of one months rental is usually paid by the Tenant to the Landlord. This is more often than not 'subject to contract' and therefore refundable in the event that a Tenancy Agreement is not signed by either party.
2. Security Deposit = 2 month’s Rental (Occasionally 3)
When the Tenancy Agreement is signed, a security deposit of two further months rental is paid by the Tenant to the Landlord, (which is non interest bearing and returned a couple of weeks after the determination of the Tenancy Agreement subject to conditions in the said Agreement). At this point the initial deposit becomes the first months rental.
Some of the Landlords / Developers who have a large portfolio of properties might insist upon a three month security deposit.
What Are The Standard Agency Fees?
50% of one month's rental is the standard Hong Kong agency fee, payable by both a Landlord and a Tenant.
What Are The Current Stamp Duty Rates?
For a standard two year lease the stamp duty rates are calculated as follows:
(0.5% of the annual rental) + HK$5 copying fee and shared between both the Landlord and the Tenant, equally (i.e. this amount halved).
What Are The Recurring Costs Involved?
1. Management Fees (if “inclusive” this is paid by the Landlord)
Management fees vary according to the number of units and the buildings facilities.
Every building has an Incorporated Owners Committee (IOC). They are responsible for ensuring the maintenance and upkeep of the premises. One of their main roles is to appoint a management company to ensure the smooth running of the premises. The IOC determines the Management Fees and these are payable on a monthly basis.
2. Government Rates (if “inclusive” this is paid by the Landlord)
The Government rates are approximately 5% of the estimated annual rental and are payable on a quarterly basis.
They are determined by the Government with due adjustments to reflect any differences in size, location, facilities, standards of finish and management.
3. Government Rent (if “inclusive” this is paid by the Landlord)
The Government Rent is approximately 3% of the rateable value of the property and is payable on an annual basis.
The Government rents are determined by the Government for the lease of the Government land on which the premises stand. All privately owned land in Hong Kong is normally held by the Government.
4. Property Tax (this is paid by the Landlord)
A Property Tax is payable if the property is rented to a Tenant. The annual amount payable is 15% of the annual rental.
The following deductions can be applied:
- Government Rates
- Mortgage interest payments for up to 5 years
- Less a 20% statutory allowance for renovations/improvements.
5. Accountant (for a Landlord)
Whilst not totally necessary, some owners appoint an accountant whose annual charges amount to between approximately HK$10,000 to HK$15,000 per year. If you buy in a company name it is advisable, and an annual Business Registration Fee currently set at HK$2,250 will also be payable.
6(a). Insurance (for the Landlord)
If the property is purchased with a mortgage, it is mandatory to have at least a fire insurance policy in place. The Mortgage Bank will advise you of their particular insurance packages.
6(b). Insurance (for the Tenant)
As a Tenant, it is advisable to have some form of household insurance / third party insurance as your possessions are not covered within the Landlord's insurance which normally covers bricks and mortar and not contents.
7. Utilities (more typically for the Tenant)
These vary, but for a 1,500s.f. - 2,500s.f. apartment, please see below the approximate costs. These are typically paid by the Tenant"
Gas - HK$100-400 per month
Water - HK$100-200 per month
Electricity - HK$1,600-4,000 per month (air-conditioning usage can change this dramatically)
Telephone / Internet - HK$500 per month (depending on your package)
8. Unfurnished vs Furnished (more typically for the Tenant)
It is more common to find unfurnished apartments. Whilst rental furniture is convenient, second hand furniture can be very cheap see www.asiaxpat.com and there are shops like Ikea which are very affordable.
Unless the unit has curtains, it is usual practice for the Tenant to buy their own.
Curtains tend to be quite expensive (very subjective) (HK$15,000 starting point, with 2 lots of curtains and blinds on other windows). Alternatively, Ikea has very cheap ready-made options.