Insiders warn purchase procedures can be complicated

HONG KONG: Village houses may be cheaper than new luxury flats, but buyers have to be prepared to wade through complicated purchase procedures.

In the secondary market, home seekers have to the check title deeds and documents relating to a village house before they buy it, warns Nelson Wong Tak-shun, general manager at Hang On Development. "You have to check whether the house has secured an occupation permit and paid the land premium to the government or not."

If people buy a ground-floor flat that includes a garden, they should also check whether the garden has been included in the title deed assignment.

Home seekers should also check whether the property has adequate easements or right of way. "Many village houses are surrounded by roads owned by private owners," Wong said. "You have to get approval from the owners to use the roads."

Frankie Liu Chun-hung, sales director at property agency Century 21, said banks may not approve a mortgage application for a village house without right of way. It was also common to see village houses with unauthorised building works, which may affect the chances of a buyer securing a mortgage loan from the bank.

"Home seekers should make a land search to check whether the property has received any order from the government to dismantle unauthorised building works," Wong said.

As the purchase procedures are complicated, Liu of Century 21 suggested buyers should seek mortgage loans from banks that have branches near the property. "They would be willing to offer loans and better mortgage rates to buyers as they are familiar with the local property market," he said.

Mortgage rates for village houses are similar to those for other properties but banks are conservative in valuing such properties. He said buyers need a larger down payment. Most buyers can borrow up to 70% of the property value.

Buyers should also look for a legal firm nearby which is familiar with the purchase procedures for village houses. Property agents estimate that legal fees for a village house purchase may be 10% higher than for other properties.

Liu said buyers must check whether documents for the property are ready, including certificates of exemption for building works and site formation works. If a vendor has lost any of the documents, it may affect a buyer's ability to secure a mortgage. — South China Morning Post