How Luxury Home Down Payments Differ In Hong Kong, Monaco And New York

monaco harbor and skyline at night with glowing lights and boats
Residential properties in Hong Kong, Monaco (pictured) and New York are some of the most expensive in the world.

Residential properties in Hong Kong, Monaco and New York are some of the most expensive in the world.

In 2020, Monaco was ranked as the world’s most expensive market. Average prices per square meter reached EUR 47,619 in the country. Hong Kong landed on the second spot in the global rankings with an average price of EUR 39,600 per square meter.

Luxury properties in New York placed third. Average prices in the U.S. state cost less than half of the top two markets combined, amounting to EUR 22,200 per square meter.

As a result, the down payment for luxury homes in these three regions may cost more than the full price of homes in the low- to mid-end segments.

When it comes to real estate, Hong Kong has an average price of EUR 39,600 per square meter.

Hong Kong

The estimated amount for a luxury home down payment in Hong Kong partly depends on the loan-to-value (LTV) limits, as part of the Mortgage Insurance Program.

As of August 2020, the Hong Kong Monetary Authority (HKMA) categorized LTV limits based on several groups including:

  • Residential property buyers with income derived from Hong Kong
  • Residential property buyers with income derived from outside Hong Kong

If you belong to the first group, the HKMA imposes an LTV cap of 50% for properties worth more than HKD 10 million (US $1.3 million).

Let’s say you plan to buy a luxury home in Mo Tat Wan for HKD 32 million (US $4.1 million). A mortgage would only cover 50% of the property’s value. You would need to pay half of the remainder in cash as the upfront payment.

Applicants in the second income group would need to pay 60% as the down payment. Remember that the rates only apply when you plan to buy luxury properties for personal use.

You should also have no outstanding mortgage to qualify for the aforementioned rates.

If you’re buying luxury properties as an investment, the HKMA sets the LTV rate at 50% and 40% for the first- and second-income groups, respectively.

A uniform LTV cap of 40% applies to all property buyers who choose the net-worth-based lending option. Use the Mortgage Repayment Calculator to estimate your monthly payments.

looking down on the harbor and waterfront in monaco

Private banks in Monaco would only grant an attractive LTV to buyers with significant assets that match at least 20% of the purchase price.

Monaco

The LTV for a luxury property mortgage in Monaco ranges from 50% to 100%. The average LTV, however, may reach up to 85% for an offshore mortgage.

For example, luxury home buyers from the U.K. could take advantage of the highest possible LTV through large collaterals.

Private banks in Monaco would only grant an attractive LTV to buyers with significant assets that match at least 20% of the purchase price.

An ideal size for collateral, which equates to 50% of the purchase price, increases the chances of loan approval. Banks would add the collateral to their assets under management.

Luxury property buyers could use the interest derived from the collateral assets to pay for the total interest from a mortgage.

new york skyline looking through bridge suspension

Luxury home buyers in New York pay the same minimum down payment rate as in other countries such as France and Switzerland.

New York

Luxury home buyers in New York pay the same minimum down payment rate as in other countries such as France and Switzerland.

Most properties in New York require down payments of at least 20% in cash. A distinct difference in buying prime properties in the state involves strict financing requirements.

Banks used to offer lower down payment rates ranging from 5% to 10%, but the situation changed because of Covid-19.

Buyers would be hard-pressed to find lenders with down payment requirements lower than 20%, especially in New York City.

While the minimum down payment in New York costs less than in Hong Kong and Monaco, buyers must review transfer taxes.

The state charges an extra 1% tax on the sale price for properties worth more than US $1 million. Also known as the mansion tax, the government collects it on top of the standard tax rate (i.e., US $2 per US $500).

In New York City, property buyers often pay the mansion tax aside from the following taxes:

  • Standard tax of US $1.25 per US $500 for residential properties worth over US $3 million
  • Up to 2.9% of supplemental tax for residential properties worth over US $2 million

A luxury property buyer might foot the bill on taxes if the law exempts the seller from tax obligations. For this reason, buyers must review tax-related clauses on a sale-and-purchase agreement.

Check out a curated list of brokers in Europe, Hong Kong and the U.S. to know more about the best ones for your next property purchase.

Author

Randolf Santos has covered different segments of the real estate industry since 2014. He worked at S&P Global Market Intelligence before joining Forbes Global Properties as a contributor. You can reach him at randolf.santos@gmail.com.

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