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Hong Kong housing

Hong Kong Housing Society agrees that prices of government-subsidised flats could be adjusted

Marco Wu, chairman of city’s second largest provider of public housing flats, gave example of 60 per cent discount during Asian financial crisis

PUBLISHED : Tuesday, 24 April, 2018, 1:07pm
UPDATED : Tuesday, 24 April, 2018, 6:21pm

The city’s second-largest provider of public housing said on Tuesday that government-subsidised flats could be priced according to what residents can afford, noting flats were once sold at a 60 per cent discount on market prices.

Hong Kong Housing Society chairman Marco Wu Moon-hoi said the current discount rate of 30 per cent for flats sold under the Home Ownership Scheme (HOS) was not fixed, about two weeks after Chief Executive Carrie Lam Cheng Yuet-ngor said she was willing to review the pricing formula to make flats more affordable for a greater number of aspiring homeowners. 

“It has been done before. I don’t think the government or the Housing Authority stipulates the price must be set at 70 per cent [of market value],” Wu said on Tuesday.

At present, subsidised flats are usually sold at 70 per cent of the market rate, but Wu, citing an example from the past, said prices had gone as low as 40 per cent of the market rate.

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He was referring to 10,156 flats introduced to the market in 1998, during the Asian financial crisis. The flats were in seven HOS estates, including Ma On Shan, Tin Shui Wai, Fanling and Lam Tin.

While these flats had a discount rate of 50 per cent, residents could buy them at a discount of between 40 to 60 per cent “to fit their actual needs”.

According to a government statement at the time, the move was to make HOS flats affordable to more people. 

Wu also denied HOS flat prices were “pegged” to the property market alone. Instead, he said, flats were priced according to affordability, which was affected by a “basket of reasons” that included mortgage interest rates and location.

He said the prices were set so that the monthly mortgage payment did not exceed 40 per cent of the buyer’s household income.

The Housing Authority, which is tasked with pricing HOS flats, would also make sure half of its target group can afford such flats, he said.

Apart from the discount rate, the authority might also adjust the income limit, he said. 

HOS flats are sold to public rental tenants as well as “white formers” – people whose household income falls under a set amount. The limit for the latest batch of 4,431 HOS flats was set at HK$57,000 (US$7,300) for this group.

There have also been calls from the public for HOS flats to be sold at construction cost, which is less than HK$1 million.

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Wu, however, questioned if this arrangement would be fair.

If the land is worth HK$5 million but the flat is sold at HK$1 million or HK$2 million, is this fair to society as a whole?
Marco Wu, Housing Society chairman

A total of 166,000 applications were received for the latest batch of HOS flats. Applications closed on April 11.

Prices ranged from about HK$1.6 million for a 277 sq ft flat in Tung Chung to about HK$6.3 million for a 630 sq ft flat in Cheung Sha Wan. 

A sale last June was almost 50 times oversubscribed, with 104,654 applicants vying for the 2,108 flats on offer.

The idea of unpegging HOS flat pricing from market levels dates back to 2011, when then chief executive Donald Tsang Yam-kuen announced in his policy address a plan to reintroduce the scheme – suspended in 2002 to shore up the private market amid an economic downturn – to help people own homes.