Hong Kong housing

Resale of Home Ownership Scheme flats needs flexibility

There is currently little incentive for owners of HOS flats to sell and free up public housing. Measures are needed to strike a balance between greater mobility in the market and equitable treatment of buyers

PUBLISHED : Sunday, 05 August, 2018, 9:22pm
UPDATED : Sunday, 05 August, 2018, 11:12pm

Land and housing supply is subject to long-term urban planning. It takes an exceptional event to prompt action that could help make a difference. A case in point could be record sales in the city’s subsidised housing market, despite new measures aimed at taming them. For example, a three-bedroom, 592 sq ft flat in Mong Kok’s Charming Garden estate, a Home Ownership Scheme (HOS) project, sold for HK$10.65 million, or HK$17,990 per square foot, almost six times the HK$1.82 million the owner reportedly paid for the flat in 1998.

Admittedly the owner cashed in after holding on to it for 10 years through three economic downturns. But the record price was enough to spark calls for the government to extend the resale restriction period from the current five years to 10 years “to prevent government-subsidised flats from being used as a tool to earn a quick profit”, to quote government-friendly lawmaker Wilson Or Chong-shing. This came just a few weeks after Chief Executive Carrie Lam Cheng Yuet-ngor announced policies aimed at providing more affordable homes, including putting 4,431 Home Ownership Scheme flats on the market next February at about half the market price, compared with the usual 30 per cent discount.

Record-breaking sale of HK$10 million subsidised flat prompts calls for further public housing restrictions

She says she will keep an open mind about extending the resale restriction period to 10 years, in line with her sentiment that “homes are for people to live in”, and believes the Housing Authority would discuss it seriously. Given that there is bipartisan agreement that five years is too short, an extension should not be too controversial.

This invites comparison with the Singapore Housing and Development Board model, under which flats are sold at a discount, adjusted for affordability as market conditions change and, after a period of restriction, can be sold or leased on the open market. In Hong Kong, the 30 per cent discount is repayable, adjusted to current market prices, which leaves local owners with little incentive to move and free up public housing.

There is therefore an argument for the government not only to extend the resale restriction on HOS flats but to introduce more flexibility to resale terms to strike a balance between greater mobility in the HOS market and equitable treatment of buyers.