Property investment

Beware risks of buying property overseas, Consumer Council warns Hongkongers

In one case, a buyer shelled out close to HK$400,000 for a property in the UK that was never developed

PUBLISHED : Wednesday, 14 February, 2018, 9:16pm
UPDATED : Thursday, 15 February, 2018, 8:46am

A Hong Kong buyer shelled out close to HK$400,000 for a down payment on a property in the UK but last July, two months before it was due to be completed, the site lay empty and deserted.

In September, the buyer learned that the developer, sunken by debt, had not proceeded with construction and had appointed another company to manage the process of compensating owners. But he struggled to get any further information from both the agent and the lawyer in Hong Kong who had been involved in the initial transaction for the HK$740,000 property.

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This case was held up by the city’s Consumer Council on Wednesday as a warning to Hongkongers to beware of the risks of buying property overseas, whether for investment or residential purposes.

Last year, the council received 35 complaints on overseas property purchases, more than double the 16 complaints in 2016. 

Unhappy buyers complained mostly about developments they bought that languished uncompleted, agents who they suspected had misled them by not disclosing the risks of insufficient property valuation, and sales and purchase contracts that differed from what agents had described.

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In the case of the Hongkonger mentioned above, the council advised him to seek legal advice as the transaction involved an overseas developer and complicated legal issues.

In another case, the council said, a buyer bought a residential unit and a car park space worth HK$2 million at an exhibition of UK residential property organised by a Hong Kong company. He paid a reservation fee of HK$30,000. But half a month later when he received from the lawyer a formal sales and purchase agreement, he was shocked to find that the name of the developer on the contract was different from that on the reservation form. 

Also, at the exhibition he was informed that the developer would charge 300 pounds annually as the land rent, but the contract stated that the yearly fee of 300 pounds was only for the first 10 years and after that, the fee would increase annually. 

The buyer refused to sign the contract and his demand for a refund was also turned down as the company said the fee was non-refundable. 

Hong Kong regulator sets rules for sale of uncompleted overseas property for the first time

Professor Wong Kam-fai, chairman of the Trade Practices and Consumer Complaints Review Committee, stressed that this was why prospective buyers of overseas properties should consider engaging professionals to get more details of the development and the developer, and have a good grasp of the country’s regulations governing home purchases.

“As the formal sales and purchase agreements are signed between the buyers and overseas developers, Hong Kong laws may not be applicable. Should problems arise it would be extremely difficult for buyers to obtain redress,” he said. 

He pointed out that although the city’s regulator of property agents had issued guidelines for local agents hawking uncompleted overseas properties, which would take effect on April 1, these only covered agents who were licensed by the Estate Agents Authority.

Currently, anyone can sell such properties regardless of whether they are licensed by the authority.