Revived housing scheme leaves no room for fairness
In light of the rather inactive HOS secondary market, I have asked the Housing Authority to seriously consider measures that can facilitate upward mobility of those in the new scheme ... When working out the details, however, we will ensure that the new arrangements are fair to existing HOS flat owners.
Donald Tsang Yam-kuen
2011 policy address
I have a declaration of interest to make. I own a Home Ownership Scheme Flat. It's all legit, premium paid and it's a beauty. Our daughter lives in it.
Thus I can stick my thumbs under my lapels and say, 'Well, Donald, I've done my bit to make the HOS secondary market more active. What's more, I don't think much of your way of doing it. What you propose will just create another tier of ownership and is as likely to slow the market down as speed it up.
The difficulty here is the premium. HOS owners buy their flats from the government at a big discount to market prices under restrictions that limit resale buyers and resale prices for several years.
Even when these restrictions end they can sell openly to the market at large only after paying a premium assessed at the difference between their costs and prevailing market prices. This can put you in a conundrum if you are an HOS owner and are looking at trading out. Do you fix your premium by paying it now and then bide your time in a rising market until you get the bid you want? It would be a good way of securing a lower premium and making some extra money but it means you have your money tied up in that premium until you sell and what if the market goes down instead of up?
On the other hand, if you wait with fixing your premium, you may find that prospective bidders shun your flat because they are looking only for premium-paid ones.
What is more, a good proportion of that extra lift you got from a rising market will go to the government as a bigger premium. The Housing Authority wins. You don't.
Solution: chew your fingernails and do nothing, which is what most prospective HOS sellers seem to do.
Donald's idea for his relaunch of the HOS is that the buyers should effectively be able to fix their premiums at the difference between cost and market price at the purchase date rather than when they sell the flats.
It's a good idea for the buyers of these new scheme flats. It will take away some of that nail-biting uncertainty from them. But it will do nothing for the owners of the 300,000 existing HOS flats. In fact, it will make things worse for them. Leave alone that it will create a special benefit for newcomers only, it will have the effect of pushing the secondary market into the new HOS flats, thus making the market for the existing ones even more illiquid. It may also depress prices in the existing market.
Donald obviously recognises that there is a difficulty here. It is why he was quick to say that 'we will ensure that the new arrangements are fair to existing HOS flat owners'.
But it is a thing that cannot be done. If he adopts anything like the new premium system he has suggested then the arrangements will be unfair to existing owners, end of story. What he has declared is that he wants to have his cake and eat it too. It shows that he and his senior bureaucrats are in a muddle on housing matters. They didn't really want to start the HOS again and they don't know quite how to do it now that they have decided they will.
Making matters even more of a muddle is that in his policy address last year Donald announced yet another tier of public housing, the My Home Purchase Plan. This is a rent-to-buy scheme whereby government will give back half of the first five years of rental payments as a subsidy on a down payment by the lucky few who pull a winning ticket for the scheme.
Will there be a fixed purchase price for these people now too, Donald, or will they just have to wait and see what prices are at the end of five years? And will you then have resale restrictions on these flats too?
Oh what tangled webs we weave when first we practise markets to deceive.