"Ah Ken, my girlfriend and I have been saving for a down payment for three years, and we finally have enough to buy a property! But after looking at a few new developments, we really have no idea how to start... Do we have to queue for a lottery? Are there any tips for choosing a flat? What should we pay attention to when signing the contract?"
This is a real inquiry I received last month. In fact, many first-time homebuyers only have a vague understanding of the process of 'buying a brand-new property' and think they can choose a unit on the spot when they go to the sales office, only to end up making a pointless trip. Some even miss out on their ideal units because they are not familiar with the rules of the game, and some encounter issues during the contract signing stage, resulting in a loss of their deposit.
As a veteran who has been in the real estate industry for over 15 years, I have seen too many cases of people 'paying their tuition fees.' Today, I will break down the complete process of buying a new property—from registration and lottery, selecting a unit, to contract details—step by step to teach you how to avoid common pitfalls and successfully move into your desired unit.
:::tip Expert Tips The biggest difference between a brand-new property and a second-hand property is that the developer will dominate the entire sales process. What you need to do is get familiar with the rules and be fully prepared, so you can stand out in the highly competitive property market. :::
Step One: Register for the Lottery — The Game Rules You Need to Know
Why Hold a Lottery? An Inevitable Mechanism Under Supply and Demand Imbalance
Hong Kong's property market has long been in short supply, and popular new developments often experience cases of 'oversubscription.' In order to allocate the order of choosing apartments fairly, developers use a 'lottery system.' Simply put, you first register as a 'prospective buyer,' and then a lottery determines your priority order for choosing apartments (i.e., your 'lottery number').
According to data from the first quarter of 2024, the average over-subscription for new developments in the urban area reached 3-5 times, while popular projects in the New Territories could be as high as 8-10 times. In other words, if you get a ticket with a later number, the unit you have in mind is likely already taken.
Registration Process: Three Key Steps
Step 1: Submit the Registration Form
- Submit in person at the sales office or through a designated agent
- Must provide a copy of ID, proof of address, and proof of income (required for some projects)
- Pay the "Intention Money" (usually $5,000-$10,000, refundable)
Step 2: Wait for the Lottery Result
- The developer will announce the lottery date (usually 1-3 days after the registration deadline)
- The lottery process may be conducted publicly, or witnessed by a law firm
- You will receive a "lottery number" notification (via SMS or email)
Step 3: Confirm the Apartment Selection Time
- Based on your draw number, the developer will schedule your date and time for selecting an apartment
- Remember to attend on time; being late may result in disqualification
:::warning Pitfall warning Some developers set up a 'priority registration' system (for example, giving existing owners or designated bank clients priority), allowing these people to choose units without a lottery. If you are not in the 'priority group,' you should be prepared that your lottery number may be later. :::
Insider Tips: Secrets to Increasing Lottery Winning Chances
Although the lottery depends on luck, you can increase your chances of 'getting your desired unit' through the following methods:
- Joint Registration by Multiple People: If you are buying a property with your partner or family, you can register separately to increase the chance of getting a higher lottery number.
- Pay Attention to the 'Second Round Sale': Units that are not sold in the first round will have a second round sale arranged by the developer, usually with less competition.
- Choose Off-Peak Times: If the project allows selecting units over multiple days, choosing weekdays or non-peak hours may offer more unit options.
Step 2: Property Selection Strategy — How to Make the Best Decision in 30 Minutes
On the Day of Choosing a Apartment: You Only Have Limited Time
When you draw your lottery number and are notified of your flat selection time, you need to be well prepared. Remember, on the day of selection, you only have about 15-30 minutes to decide which unit to buy, and there will be a large number of competitors selecting units at the same time, making the pressure extremely high.
:::highlight Practical Experience Sharing I had a client who drew lot number 50. The 3-bedroom unit they originally liked had already been taken. But because they had done their homework beforehand and prepared 5 'backup options,' they ended up choosing a unit with the same orientation but on a higher floor, and it was $200,000 cheaper! :::
Three Major Preparations to Make Before Choosing a Apartment
Preparation 1: Study the Price List and Floor Plans
- Developers will release a "price list" before the sale, listing the prices, sizes, floors, and other information of all units.
- Carefully study the floor plans, paying attention to the layout of the unit, window positions, view, and more.
- Use a highlighter to mark your preferred units and rank them by priority (prepare at least 5-10 options).
Preparation 2: On-site Inspection of Show Units
- Visit the sales office to see the show units and get a sense of the actual space
- Be aware that "show units" may be specially designed (for example, using smaller furniture), so the actual units might feel more cramped
- Ask clearly about the "handover standards" (for example, whether kitchen cabinets, air conditioners, etc., are included)
Preparation 3: Calculate Contribution Capacity
- Use a mortgage calculator to work out the monthly payments (including interest, management fees, rates, and rent)
- Ensure payments do not exceed 50% of household income (bank stress test requirement)
- Set aside extra funds for renovation, furniture, legal fees, and other expenses
Choosing a Property on Site: Three Golden Rules
Rule 1: Stay Calm and Analyze, Don't Be Influenced by the Atmosphere There will be many people choosing properties at the same time, and the salespeople will keep urging you to 'decide quickly.' Remember to stay calm and select according to the checklist you prepared in advance.
Rule 2: Prioritize "Value Retention Factors" If you might sell or rent out in the future, consider the unit's "value retention capability":
- Floor: Middle to high floors are more popular (avoid low floors due to noise and privacy issues)
- Orientation: South-facing or southeast-facing units are more popular (better natural light)
- View: Open views are preferred over building-facing views
- Layout: Square and practical; avoid unusual units like "diamond-shaped living rooms" or "L-shaped rooms"
Rule 3: Sign the 'Provisional Sales and Purchase Agreement' on the Spot Once you decide to buy a unit, you must sign the 'Provisional Sales and Purchase Agreement' (commonly called the 'PSA') on the spot and pay a deposit (usually 5% of the property price). This deposit is non-refundable, so make sure to think carefully before signing.
:::success Success case I had a client who, on the day of choosing a unit, found that their preferred unit had already been taken. However, after calmly analyzing the situation, they chose a lower-floor unit with a more open view. As it turned out, after moving in, this unit, overlooking the park, was actually quieter and more comfortable than the higher-floor units, and the price was also $300,000 cheaper! :::
Step Three: The Signing Process — The Devil is in the Details
Preliminary Sale and Purchase Agreement vs Formal Sale and Purchase Agreement
Many people think that signing the 'preliminary agreement' means the deal is done, but that's not the case. Buying a first-hand new property involves two contracts:
Provisional Sales and Purchase Agreement (Provisional Agreement)
- Signed on the spot on the day of choosing a property
- Payment of a deposit (usually 5% of the property price)
- Legally binding, both buyer and seller must comply
Formal Sale and Purchase Agreement (Formal Contract)
- Usually signed within 14 days after signing the provisional agreement
- Requires payment of an ‘additional deposit’ (usually another 5% of the property price, totaling 10%)
- Handled by a law firm, with detailed transaction terms specified
Five Major Clauses to Read Before Signing a Contract
Clause 1: Payment Methods The developer will offer various payment plans, such as:
- Full Payment Plan: Pay the full property price before taking possession, with the highest discount (usually 10-15%)
- Construction Period Payment: Pay the balance after the building is completed, with a lower discount (usually 5-8%)
- Second Mortgage Plan: The developer provides an additional mortgage, but with higher interest rates
:::tip Experts recommend If you have ample funds, choosing the 'Immediate Payment Plan' can save the most money. But if you need time to gather the down payment, the 'Construction Period Payment' would be safer. Definitely don't choose the 'Second Mortgage Plan' just to chase discounts, because the interest expenses might offset all the discount benefits. :::
Clause 2: Handover Date
- Pay attention to the 'Estimated Key Dates' (i.e., the estimated completion date)
- If the developer delays the handover, you have the right to claim compensation (but the amount usually has a cap)
Clause 3: Clubhouse and Facilities
- Confirm whether the clubhouse facilities are included in the management fees
- Some developers may exaggerate the clubhouse facilities in the sales brochure, which may be 'downsized' after completion
Clause 4: Parking Spaces and Storage Rooms
- If you need a parking space, make sure to ask clearly whether it is "included in the property price" or "requires additional purchase."
- The same logic applies to storage rooms; don’t assume that “free” necessarily means they are provided.
Clause 5: Right of Withdrawal (Cooling-off Period)
- According to the Residential Properties (First-hand Sales) Ordinance, buyers have a 5 working day "cooling-off period"
- If you change your mind during this period, you can withdraw from the transaction, but you must pay "5% of the deposit as compensation"
After Signing: Mortgage Application and Law Firm Follow-up
After signing the formal contract, you need to start handling the mortgage application and law firm documents:
Mortgage Application
- Submit the mortgage application to the bank as soon as possible (it is recommended to apply to 2-3 banks simultaneously to compare interest rates and rebates)
- Prepare documents: ID card, proof of address, proof of income, tax bill, bank statements, etc.
- Wait for bank approval (usually takes 2-4 weeks)
Law Firm Follow-up
- The developer will appoint a law firm to represent them, and you also need to hire a lawyer to represent you.
- The lawyer will review contract terms, handle the property deed, and arrange handover matters.
- Lawyer fees are usually 0.1-0.2% of the property price, plus miscellaneous fees.
:::warning Common pitfalls Some buyers, in order to save on lawyer fees, may choose to have 'the same law firm represent both parties in the transaction' (commonly known as 'dual representation'). However, this carries extremely high risks, because the lawyer may side with the developer. It is recommended that you definitely hire an independent lawyer to represent yourself. :::
Notes and Risks: Avoid These Common Pitfalls
Misconception 1: Thinking that 'pre-sale flats' will definitely appreciate in value
Many people buy a brand-new property because they believe that 'pre-sale units' will appreciate. But in fact, pre-sale units also carry risks:
- If the property market drops, you might have to 'sell at a loss' (that is, sell below the purchase price)
- If the developer delays the handover, you might have to continue renting, increasing expenses
Professional Advice: Don't buy pre-sale properties purely for 'speculation'. If you are buying for personal use, you need to consider your actual needs (such as your workplace location, school district, etc.).
Misconception 2: Ignoring "Hidden Costs"
Buying a new property, besides the purchase price, also comes with many "hidden costs":
- Legal fees, stamp duty, broker commission (if any)
- Renovation costs, furniture costs, moving costs
- Management fees, rates and government rent, utility deposits
Professional Advice: Set aside at least 10-15% of the property price as 'extra expenses' to avoid cash flow problems.
Misconception 3: Getting Carried Away by 'Instant Discount'
The developer's "Immediate Payment Plan" offers very attractive discounts, but you need to calculate carefully:
- If you choose immediate payment, you need to raise a large amount of funds in a short period of time.
- If you need to borrow a high LTV mortgage (for example, 80-90%), the bank may not approve the immediate payment plan.
Professional Advice: First, check with the bank regarding mortgage approval to ensure you are capable of handling an immediate payment plan before rashly signing a contract.
Misconception 4: Easily Trusting Sales Brochures and Show Units
The sales brochure and show units are the developer's "promotional tools," which may exaggerate or beautify the actual situation:
- The show units may use smaller furniture to make the space look bigger
- The computer-generated images in the sales brochure may differ from the actual scenery
- Clubhouse facilities may be 'downsized' or require additional charges
Professional Advice: Personally visit the construction site to understand the surrounding environment (such as whether there is noise, transportation facilities, etc.). At the same time, carefully read the sales brochure and pay attention to the "disclaimer clauses".
Summary: Be Well Prepared, Get On Board Smoothly
Buying a new property unit may seem simple on the surface, but in reality, it involves a lot of details and potential risks. From registration and lottery draws, to selecting units and contract terms, every step must be handled carefully to avoid paying the 'tuition fee'.
Remember the following key points:
- Before the lottery: Do thorough research and prepare multiple backup options.
- When choosing a property: Stay calm and select according to your pre-made plan.
- Before signing the contract: Carefully read the contract terms and hire an independent lawyer.
- After signing the contract: Apply for a mortgage as soon as possible and set aside extra funds for expenses.
The Hong Kong property market is highly competitive, but as long as you are well-prepared and familiar with the rules of the game, you can still get on the property ladder and buy your desired unit. Remember, buying a property is a major event in life, so never make a wrong decision due to a moment of impulse.
:::success Final reminder If you still have questions about buying a brand new property, or want to learn more property buying strategies, feel free to subscribe to our blog, or leave a comment to communicate with us. We regularly share the latest real estate market information, mortgage strategies, investment insights, and other content to help you avoid detours on your property buying journey! :::
Have you ever tried buying a brand-new property? Was the process smooth? Feel free to leave a comment below to share your experience, or send us a private message to inquire about professional advice!