Buying property in Hong Kong is straightforward and it’s not as common to come across non-serious real estate agents, in comparison with developing countries like Cambodia.
Still, prices are among the highest in the world, a reason why many Hong Kongers now decide to invest overseas, in countries like Vietnam instead.
If you buy property in Hong Kong, you’ll probably want to know what loan options you have. Therefore I’ve contacted a number of Hong Kong banks and written this guide. Let’s have a look.
How can I get a property loan as a foreigner in Hong Kong?
I was surprised when talking with different banks in Hong Kong and realized how open they are to foreign borrowers. The process to apply for loans is very similar between locals, PR holders and non-resident foreigners. This is something we’ve seen in Singapore as well.
The key aspect that determines how much you’ll be able to obtain is mainly depending on your source of income. The banks don’t take your nationality into consideration, which is good, it’s all about your source of income.
The usage, or should I say type of property, will also have some impact. Whether you buy as an investor (to rent out) or for self usage (see more below where I’ve included an excerpt from the Hong Kong Monetary Authority’s website).
Buying for self usage will keep the loan amount higher, on the contrary, when you buy a property to rent out, sometimes referred to as investment property by the banks, the loan-to-value amount is often reduced by 10%.
To summarize: Foreign non-residents have no restrictions to apply for a property loan in Hong Kong, the loan amount and tenure granted will highly depend on your source of income and what kind of property you buy.
How high property loans can foreigners get in Hong Kong?
Loan-to-value ratio, sometimes referred to as LTV, determines how much you will be able to loan from a bank. It’s simply as that. The rate is expressed as a percentage and normally 60-80%, but sometimes even up to 90-95% for locals or PR holders.
Simply put, if a property costs HKD 5 million and your LTV is 50%, the bank will cover HKD 2.5 million of the purchase price, or the valuated price, whichever is lower.
Most of the banks I’ve been in contact with offer an LTV of 50% to non-resident foreigners who wish to buy property in Hong Kong. This can seem to be somewhat low, as Hong Kong property prices are comparably expensive.
I highly recommend you to check the official LTV rates on the Hong Kong Monetary Authority’s website.
Total Debt Servicing Ratio (TDSR)
In addition to the LTV, the TDSR is one of the most important terms you’ll hear when discussing property loans with banks. TDSR stands for total debt servicing ratio and calculated through so called ‘stress tests’. The tests and the rate will assure that you’re capable to repay the interests you have on any outstanding debts.
As explained by Investopedia, the TDSR is calculated as follows:
(Annual mortgage payments + Property taxes + Other debt payments) / Gross Family Income
Banks in Hong Kong take the ‘stress tests’ seriously and normally include a majority of your loans, including car loans and more. The higher the TDSR, the more you’ll struggle with your repayments of the loans. The acceptable DSR is normally 40-60%, depending if you have any other existing loans, your source of income and whether a stressed or base TDSR limit is used.
The same as it goes with the LTV, you can find the official TDSR rates on the Hong Kong Monetary Authority’s website.
Process when applying for a property loan in Hong Kong
The process is similar compared to Singapore, that I’ve already covered in one of my separate articles (see link in the first paragraph). Below I’ve included a summary of the application process in short words:
A. Contact a handful of banks and download application forms.
B. Submit the application forms and other required documents. The documents normally include (as stated on Citibank’s website):
- HKID or passport of borrower (and guarantor)
- Temporary Sales Agreement (for new purchases)
- Latest 3 month’s payroll record (bank statement)
- Latest tax return and employment letter
- Latest repayment schedule or latest 3 months’ mortgage repayment record (for refinance)
C. The selected bank does a valuation of the property
D. The bank decides your loan terms based on the results from the valuation and your application
E. You sign the Letter of Offer (confirmation letter for a mortgage)
F. Engage a conveyancing lawyer to finalize the transfer of the property
Hang Seng property loans for foreigners
Hang Seng is a local Hong Kong bank that was founded in 1933. The bank offers loans to both locals and foreigners. According to Hang Seng, the key point that will determine your loan amount is your source of income, which should preferably be in Hong Kong.
The loan tenure is up to 30 years and with a loan amount of over HKD 1 million you pay an interest rate of 2.15%. The rate is calculated by using the base rate of 5% and by deducting Hang Seng’s own rate of 2.85%.
After you’ve signed the SPA, the bank will need around 1-2 weeks to approve the loan and you’ll also need to open a bank account.
A drawback is that you need to sign the SPA, before you can actually apply for the loan, which can be somewhat risky.
DBS property loans for foreigners
DBS is a Singapore based bank and one of the biggest in Southeast Asia. They also have branches in Hong Kong. When i spoke with DBS, they simply provided data from the matrix that can be found on the Hong Kong Monetary Authority’s website (see above).
For example, if you apply for a loan that’s over HKD 10 million, your income comes from outside if Hong Kong, you’ll get an LTV of 40%. If your source of income comes from Hong Kong, the LTV is slightly higher and 50%.
The loan tenures are the same for locals, foreign workers, PR-holders and non-resident and up to 30 years. DBS also mentioned that the age of the property and the applicant (which is not surprising) will affect the loan amount granted.
Bank of China property loans for foreigners
The same as it goes with the above mentioned banks, Bank of China doesn’t take your nationality into consideration. They mostly look at your source of income, how you will use the property (for self dwelling or as an investment) and your residency status. It’s generally easier to obtain a loan if your income is generated in Hong Kong, the rates will be the same for foreigners and locals.
The LTV offered differs depending on the usage and the price of the property. In case your property cost less than HKD 10 million and for self usage, you can be granted an LTV of up to 60%.
The rate drops with -10% if you decide to rent it out, and with an additional -10% in case you’re not a resident in Hong Kong. The loan tenure is set to up to 30 years.
Bank of China also confirmed the TDSR which is 40% in case you generate income from overseas (this includes all your debt obligations like car loans). If you generate income from Hong Kong, the TDSR is slightly higher and 50%.
Not surprisingly, you also need to open a bank account with Bank of China and visit a local branch to finalize a loan.
Other banks in Hong Kong
There are a number of other banks you can contact, that might be able to offer loan packages to you. Some of the biggest are:
- Standard Chartered
I would recommend that you send an email or give these banks a call as well, to see what they are able to offer.
It’s surprisingly easy to get property loans in Hong Kong, even if the rates might be a bit low, stretching from 40-60%.
Banks normally don’t take your nationality into consideration whatsoever, instead, your source of income, residency status and usage will determine the loan amount you’ll be able to receive.
If you want to know more about the property market in Hong Kong, I also recommend you to read my separate article.
I’ve contacted a handful of banks that all offer property loans for Hong Kong properties to non-resident foreigners. You’ll also find a number of other (international) banks who are worth contacting.
I also recommend you to read my separate guide that explains how you can buy property as a foreigner in Hong Kong.