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Hong Kong housing

Half-priced 278 sq ft flat in Hong Kong will only cost HK$1.18 million – but there’s a catch, a clause stopping owners selling them for a profit for five years

Housing Authority wants higher discounts for subsidised flats to be linked to tougher restrictions on who apartments can be sold to, when, and how much for

PUBLISHED : Friday, 13 July, 2018, 9:32pm
UPDATED : Friday, 13 July, 2018, 11:21pm

The next batch of subsidised flats in Hong Kong will be available for as little as HK$1.18 million (US$150,000), but there is a catch.

The 4,431 flats at three housing estates in Cheung Sha Wan, Kai Tak and Tung Chung will be sold for HK$4,976 to HK$7,246 per square foot, or between HK$1.18 to HK$4.7 million, according to a Housing Authority paper seen by the Post.

However, tougher resale restrictions proposed by the authority would limit a homeowner’s ability to sell for a profit, although some lawmakers do not think they go far enough.

At the moment, homeowners can choose to sell their flat on the open market if they have paid back the discount they received when purchasing it.

The authority wants that to change, with people limited to who they can sell the flat to, and how much for, in the first two years of ownership. After five years, the flat can be sold on the open market, but only if the initial discount of 48 per cent, or HK$1 million in the case of the cheapest flats, has been repaid to the authority.

Lawmaker Andrew Wan Siu-kin dismissed the proposals as a “quick win” for Chief Executive Carrie Lam Cheng Yuet-ngor, and said the five-year limit would do little to deter speculative investors.

The new flats to go on the market will be the first ones affected by a host of new policies proposed last month by Lam to ease the city’s housing crisis, by providing more affordable homes.

Subsidised flats in the Home Ownership Scheme have previously been linked to property market prices, and since 1991 have generally been sold at a 30 per cent discount.

But the red hot property market in recent years, in which Hong Kong became the world’s most unaffordable city to own a home, propelled lawmakers and concern groups to pressure the government to revamp its pricing mechanism.

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Under the new rules, which are based on a family’s budget and affordability, the discount would be equivalent to about 48 per cent of the market price.

The flats, ranging in size from 278 sq ft to 631 sq ft, were originally priced between HK$1.6 million to HK$6.3 million.

However, the authority wants the higher discounts to come with conditions attached.

“Since the new pricing mechanism will mean that subsidised flats would be sold at higher discounts, members of the authority’s subsidised housing committee believed that the resale restrictions should also be tightened accordingly,” the document read.

Under the new rules, homeowners would only be allowed to sell the flat at the original purchase price to eligible first-time buyers who meet certain income and asset limits within the first two years of ownership.

They would also have to wait for a full five years before they can sell the flat in the open market after paying back the discount they received when purchasing the flat.

In years three to five the owner can opt to sell the flat to a public rental housing resident, or an eligible first-time buyer, at a freely negotiated price without having to pay back the discount to the government.

This option remains the same under the new rules, but homeowners will have to sell it at a price stipulated by the Housing Department. The department will calculate the price based on the market value of the property at the time, and apply a 48 per cent discount.

In April, the authority received about 150,000 applications for the 4,431 flats, but said it will launch another round of applications in October since the price adjustments and new rules will apply.

The government’s advisory committee is expected to discuss the proposals on Tuesday.

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Wan, who is a member of the committee, said he was disappointed with the new resale measures.

“It seems like Carrie Lam is just aiming for a quick win,” he said. “What they should be doing is to amend the laws to lengthen the resale restriction period to 10 years, instead of the current five.

“Otherwise after five years, these flats being sold on the open market will just become another tool for speculative buyers to push up property prices.”

A 150 sq ft subsidised flat in Cheung On Estate in Tsing Yi set a record for being the most expensive subsidised flat to be put out on the open market at a price of HK$3.2 million, or HK$21,333 per sq ft this week.

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The Federation of Public Housing Estates, which represents public housing residents, said it welcomed the measures, since it would prevent subsidised flats from being sold in the private property market for a period of time.

But they also suggested future subsidised housing projects should be only sold to public rental housing residents, or eligible first-time buyers.

Around 15 per cent of Hong Kong’s 7.3 million residents live in some 400,000 subsidised flats.

Stanley Wong Yuen-fai, chairman of the subsidised housing committee, said it made more sense for the bigger discounts and new rules to be applicable to the upcoming batch of flats, as very few people would consider buying knowing cheaper ones would be on the way next year.

He said the resale restrictions were the “tightest possible within the current legal framework”, but the committee could look at tightening them even further in the future, should the community feel it necessary.