Sound Advice
Attractive though the mainland property market may seem, buyers should be aware of the laws and regulations they need to adhere to
Hongkongers wishing to invest in property in the mainland should be aware of the numerous regulations required of them.
Chris Yeung, Savills Property Service Beijing's associate director, said Hong Kong investors needed to know about transferring money into and out of the mainland, tax implications and the value of a good property manager, among others, to get the most out of a purchase.
Mr Yeung says that funds coming into the mainland need to be registered in order to get any income out of the property into an overseas account to pay a mortgage, for instance.
'You have to first have a formal contract [with the developer] and then get registered with the [local] government. With the contract and the registered papers, you can then go to the foreign exchange bureau to apply for a certificate to change the money.
'You want to register the capital coming in with the Foreign Exchange Bureau because in future when you want to realise your gain and sell your unit, you have to use the same channel to send money out. You can't just put it in a suitcase and take it out.'
The first move after deciding to buy is to pay the deposit to hold the unit. The down payment for a Hong Kong buyer is usually 30 to 40per cent of the purchase price.
After signing the sales and purchase contract, that document can be used to go to the exchange bureau to get the remaining money into the mainland. It traditionally comes into the developer bit by bit until it is fully paid.
'There are many banks such as Far East Bank and HSBC that are well versed in the process and can pay a developer,' Mr Yeung says. 'If you want to pay in one time as a lump sum, it takes months.'
He recommends using Hong Kong or United States currency to borrow money in Hong Kong because the local interest rate is low and the yuan is constantly appreciating.
A top management company is paramount to ensure that a property is taken care of and is always in an attractive condition to potential renters. A good manager can also take care of any problems or emergencies that may arise. They also collect rent, pay tax on income and transfer money to the owner's overseas account.
Mr Yeung says potential buyers should initially look at existing infrastructure in an area, such as schools, hospitals, shops and public transport, as well as plans for the future as a progressive local government could help raise the future value of a property.
Mr Yeung advises investors to look for anything that could provide an annual rental return of 5per cent or more.
He suggests that instead of reaching for the top tier of the market, buyers should invest in two to three bedroom units in the 30,000 yuan (HK$33,425) per square metre range as they are in demand as rentals and still have room for appreciation.
