Thinking about buying a property in Hong Kong before it’s even built? Off-plan purchases can offer attractive pricing and flexible payment terms, but they come with unique stamp duty considerations and regulatory requirements. With Hong Kong’s property market undergoing significant stamp duty reforms in 2024, understanding the current rules is more important than ever for making informed investment decisions.

Understanding Off-Plan Property Purchases in Hong Kong

Purchasing a property directly from a developer before construction is completed, commonly known as an “off-plan” or “uncompleted property” purchase, represents a significant segment of Hong Kong’s residential market. These transactions offer buyers the opportunity to secure properties at pre-construction prices, but they come with specific regulatory frameworks and stamp duty obligations that differ from completed property purchases.

The Lands Department Consent Scheme: Your Protection Framework

What Is the Consent Scheme?

The Lands Department Consent Scheme is an administrative framework that regulates the sale of uncompleted buildings in Hong Kong. Through this scheme, the Legal Advisory and Conveyancing Office (LACO) may issue consent for developers to sell uncompleted units. The term “property under construction” covers both:

• Uncompleted buildings or developments where construction has not finished
• Buildings that have been erected but for which the developer has not yet obtained an occupation permit or certificate of compliance from the Government

Purpose and Buyer Protection

The Consent Scheme exists primarily to protect purchasers in case the developer becomes bankrupt before the property is constructed. The scheme allows the Director of Lands to ensure that developers have complied with specific requirements before granting permission to sell properties under construction.

Key requirements include:

• Verification of the developer’s financial standing and financing arrangements
• Confirmation that the development has reached a specified construction stage
• Evidence that the developer has financial resources to complete the development
• Compliance with various conditions aimed at enhancing consumer protection

Current Stamp Duty Framework for Off-Plan Properties (2024-2025)

As of February 28, 2024, Hong Kong has substantially simplified its residential property stamp duty regime. All residential property transactions, including off-plan purchases, are now subject only to Ad Valorem Stamp Duty (AVD) at the following progressive rates:

Note: Stamp duty is calculated on the higher of the purchase price or market value of the property. These rates apply equally to all buyers regardless of residency status or number of properties owned.

Abolished Stamp Duties (Since February 28, 2024)

• Special Stamp Duty (SSD): Previously imposed on properties resold within 24-36 months at rates up to 20% – now completely abolished
• Buyer’s Stamp Duty (BSD): Previously a 15% (later reduced to 7.5%) levy on purchases by non-Hong Kong permanent residents – now completely abolished
• New Residential Stamp Duty (NRSD): Previously an additional 15% on buyers who already owned residential property – now eliminated

Critical Timing Requirements and Penalties

When Must Stamp Duty Be Paid?

Understanding the timing requirements for stamping off-plan property agreements is crucial to avoid penalties. The rules differ depending on the sequence of agreements signed:

Penalties for Late Stamping

Failure to stamp agreements within the required timeframe results in substantial penalties calculated on the amount of stamp duty payable:

• Up to 30 days late: 2 times the stamp duty amount
• 30 days to 2 months late: 4 times the stamp duty amount
• More than 2 months late: Up to 10 times the stamp duty amount

Both the seller and buyer are held jointly and severally liable for stamp duty payment and any penalties incurred.

Special Considerations for Off-Plan Resales

Resale Before Completion (Assignment or Nomination)

With the abolition of Special Stamp Duty in February 2024, the landscape for off-plan property resales has changed dramatically. Previously, reselling an off-plan property quickly could trigger SSD at rates up to 20%, making such transactions financially prohibitive for many buyers.

Current situation: Buyers can now resell off-plan properties at any time without incurring additional stamp duty beyond the standard AVD on the resale transaction. This applies to:

• Assignment of the purchase agreement to another buyer
• Nomination of a different buyer to complete the purchase
• Resale after taking possession but before obtaining final title

Practical Examples and Calculations

Example 1: First-Time Buyer Purchasing Off-Plan Unit

Scenario: A Hong Kong permanent resident purchases an off-plan apartment for HK$6.5 million, signing a provisional agreement on March 1, 2024, and a formal agreement on March 20, 2024.

Stamp Duty Calculation:

• Property value: HK$6.5 million
• Applicable AVD rate: 3% (since HK$6.5 million falls in the HK$6,642,861 – HK$9,000,000 bracket)
• Stamp duty payable: HK$195,000 (3% of HK$6.5 million)
• Deadline for payment: April 19, 2024 (30 days from formal agreement signed within 14 days)

Example 2: Non-Resident Investor Purchasing Off-Plan Unit

Scenario: A non-Hong Kong resident purchases an off-plan apartment for HK$10 million on April 1, 2024.

Stamp Duty Calculation:

• Property value: HK$10 million
• Applicable AVD rate: 3.75% (since HK$10 million falls in the HK$10,080,001 – HK$20,000,000 bracket)
• Stamp duty payable: HK$375,000 (3.75% of HK$10 million)
• Deadline for payment: May 1, 2024 (30 days from provisional agreement)
• No additional BSD or NRSD: These were abolished in February 2024

Due Diligence Checklist for Off-Plan Buyers

When purchasing off-plan properties in Hong Kong, buyers should undertake the following due diligence steps:

1. Verify Consent to Sell: Confirm that the developer has obtained Consent to Sell from the Lands Department before making any payment
2. Review Payment Terms: Understand that payments will be held by the developer’s solicitor as stakeholder under the Consent Scheme
3. Check Developer’s Track Record: Research the developer’s financial standing and history of completing projects on time
4. Understand Construction Timeline: Clarify the expected completion date and provisions for delays
5. Calculate Total Costs: Factor in stamp duty (payable within 30 days), legal fees, and any developer-imposed charges
6. Review Sales Documents: Carefully examine the sales brochure, price list, and preliminary agreement terms
7. Engage Professional Advice: Consult with a solicitor experienced in Hong Kong property transactions before committing

Off-plan property purchases in Hong Kong offer unique opportunities but require careful navigation of stamp duty obligations and regulatory frameworks. With the simplified stamp duty regime introduced in 2024, the entry costs for both local and international buyers have been significantly reduced. However, the importance of due diligence, professional advice, and strict compliance with timing requirements remains paramount. Always consult with qualified professionals before making any property purchase decisions.