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SCMP Reporter

If two-year resale revision works, it may help ease the financial burden on the cash-strapped Housing Authority

Analysts and property consultants say the government has taken a positive step towards adopting a non-intervention policy by easing the resale restrictions on Housing Authority apartments.

The move has been applauded by the private sector, and some market watchers say it could also help ease the financial burden on the authority.

But some observers question whether the revised policy will actually work.

The  policy  came into effect   when it was announced last week by the authority. It enables  about 39,000 owners of home ownership scheme (HOS) flats to sell their properties on the open market - after settling the land premium with the authority - two years  after buying them. Previously, flat owners had to wait five years.

The revised policy also applies to the 57,000 owners who have bought the authority's rental units under the so-called tenants purchase scheme (TPS). Owners can still choose to sell their units back to the authority at the purchase price within  two years.

Shih Wing-ching, chairman of Centaline Group, saw it as a positive move. 'It signals the government's determination to withdraw its hand from the market,' said Mr Shih, who is also an authority member.

Authority documents state that 'promoting home ownership is no longer one of the authority's policy objectives'.

In order 'to reaffirm a clear and coherent message of minimising market intervention', the authority terminated its housing loan scheme  in July last year,  while HOS flats will not be sold until after 2007.

Market observers said the revised policy was also intended to generate more income  for the authority.  It could boost land premium income by about $182 million a year, the authority said, and also save in costs  associated with buying back HOS or TPS flats.

Housing critic Wong Kwun, chairman of the Federation of Hong Kong, Kowloon and New Territories Public Housing Estates Resident and Shopowner Organisations,  warned of a poor response because  owners might not be able to afford to pay the land premium.

To subsidise  HOS flats, the government grants the Housing Authority land at a reduced premium.   Owners buy their flats at a discount, but are required to pay a premium  at market value when  they sell.

Midland Realty chief analyst Buggle Lau Ka-fai  said that the selling price of HOS flats would not be attractive to home seekers because of the premium.

Mr Lau said  a unit at the HOS project Rhythm Garden in San Po Kong, for example, would be offered for sale at $3,600 per sq ft to $4,000 per sq ft after settling the premium. This price was  only slightly below that of a private project  in Diamond Hill, where flats at The Galaxia were selling for $4,300 per sq ft to $5,000 per sq ft in the secondary market.

'Such a small price difference is unlikely to lure home seekers to buy HOS flats,' he said.

Agents said homebuyers would prefer private flats because the standard of management was higher. The policy would not lead to a rush of HOS  flat sales, they said.

An authority spokesman  said the  arrangement would increase the mobility of the property market. He also dismissed fears the move could hit the secondary private housing market.

'The number of HOS or TPS flats to be released to the market under the new policy would only constitute a very insignificant proportion of residential transactions. The overall impact on the private market would be minimal,'  the spokesman said.

Given the sensitivity of the HOS issue,  there is speculation that the relaxation of resale restrictions was a subtle move by the government  ahead of an early lifting of the sale ban on HOS units.

About 16,500 HOS units completed before the ban was imposed three years ago are  vacant.

The Democratic Party said the ban would cost the authority $10 billion between now and 2007 when it expired and  proposed selling  2,000 to 3,000 units a year.

The Housing Bureau said there was no plan to lift the ban.



Policy change applauded but doubts linger