HOS sale options under review
Housing officials have disclosed five options for pricing new Home Ownership Scheme flats, including two intended to address concerns that the new scheme may be 'too generous' to buyers.
Analysts say it is too early to say whether the new scheme will be more generous, but they believe the interest-rate arrangement will help achieve the policy objective to help buyers save money and move on to the private market.
A source from the Transport and Housing Bureau said yesterday the government had no preference for any of the options, which will be discussed by the Housing Authority today.
'But as the arrangements will involve subsidising home ownership with public money, they should also be acceptable to the community as a whole,' the source said.
The Home Ownership Scheme, which will provide 5,000 flats a year from 2016 for families earning between HK$20,000 and HK$30,000 a month, was resurrected last year after being suspended in 2003. These subsidised flats have been priced with reference to applicants' mortgage repayment ability, suggested as a 40 per cent mortgage-income ratio.
Under the old scheme, a flat owner had to pay a premium to the authority when reselling the property. This was because the authority had sold it at a steep discount. For example, if the discount was 30 per cent, the owner would have to pay the authority 30 per cent of the prevailing selling price.
Under the new plan, the premium serves as a loan to the buyer, fixed at the time of purchase. When the flat is resold, the owner pockets the balance after repaying the premium.
Under the first option, the premium is provided as an interest-free loan. It is seen as the most generous to buyers and is unlikely to be endorsed by the authority.
The second option is a loan at a floating interest rate lower than the average best lending rate of banks.
The third option adds 1.5 percentage points as 'a risk-adjusted factor' to the floating rate in the second option to protect against bad debts.
Another option is similar to the second, but the interest rate is fixed at the time of purchase.
The final option offers a fixed interest rate of 2 per cent.
Raymond So Wai-man, a financial professor and a Housing Authority member, said the third option was the 'most fair', striking a balance between subsidising homebuyers and protecting taxpayers' money.
So said the interest rate in the fifth option was too low and would mean a financial loss to the authority.
The bureau's study shows that under the new scheme, homebuyers in general would be paying a lower premium than that under the old plan.
On average, for selected 50-square-metre HOS flats that were sold in 1990, owners would have to pay a premium of HK$730,000 to the authority if they resold them under the old scheme.
If the owners were covered by the new arrangements, they would have to pay a premium of HK$210,000 to the authority under the first option.
The second and third options would see premiums of HK$560,000 and HK$570,000.
The fourth option would incur a premium of HK$1.08 million and the fifth HK$320,000.
While some lawmakers say the new premiums should also cover existing HOS owners, the source said the old methodology was written into the law and their contracts.
The maximum discount to the market price at which flats are sold under the Home Ownership Scheme