Would you dare buy a deedless flat for HK$1.67M?

Property prices appear to show signs of stabilising this year and some buyers with genuine housing needs are gradually returning to the market to search for their ideal home. A recent listing in Sham Tseng caught attention with a price in the one million range, i.e. less than HK$4,000 per square foot¹, which is well below market level.

Why such a bargain? The flat turns out to be a “deedless flat”. But what does that actually mean and what risks should you be aware of before considering a purchase?

What is a “deedless flat”?
 

A property deed is the official document that proves ownership of a property. Once registered with the Land Registry², the ownership is legally protected and cannot be disputed. When a property is sold or transferred, the deed passes from the original owner to the new one, recording all changes in ownership and property details.

If the property is under mortgage, the deed is held by the bank as collateral and will only be returned to the owner once the loan is fully repaid. However, if the deed is accidentally damaged, lost, or not properly passed on to heirs after the owner's death, the property becomes what is known as a “deedless flat”.

In short, without a deed, it is difficult to prove who legally owns the property. This could lead to legal disputes, complications in buying or selling, and may even affect mortgage approval.

Why are deedless flats heavily discounted?
 

When selling a property, the owner must provide the deed so it can be passed to the new buyer. If the deed is damaged, partially missing or completely lost, the property is considered a deedless flat.

Without a valid deed, the ownership becomes unclear. Banks may refuse to offer a mortgage for such properties and even if financing is available, the loan amount is often lower than for regular flats. Buyers would need to prepare a larger down payment. 

In future, the same issue may arise when reselling. The lack of a deed could again limit mortgage options and make the property harder to transfer.

Due to the challenges in securing a mortgage and reselling the property, deedless flats are generally valued well below market price. The discount could reach up to 30% or even more³.

Ready to buy? Start by improving your credit score
 

If you have sufficient funds and are looking to buy a property at a lower price for self-use or rental income, a deedless flat may still be one of the options even though the risks are higher.

While it may be more difficult to secure a mortgage for a deedless flat, approval is still possible under the right conditions. If the flat is of good quality and the applicant has strong personal credentials, including a favourable credit score, some banks may be willing to offer partial financing.

To achieve a favourable credit score, start reviewing your credit status and credit report around 6 - 12 months before buying a property. If your credit score is not ideal, this gives you enough time to improve your credit habits and improve your score step by step.

References:

1. 經濟日報 - 另類物業｜業主失踪丟空20年 一原因終被收樓 大屋苑2房賤價167萬元售 (Content in Chinese only)
2. The Land Registry - Title Registration
3. HKET - 樓市錦囊｜無契樓低市價一半或以上 原來隨時做唔到按揭會「中伏」？ (Content in Chinese only)

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