‘Starter homes’ scheme targeting Hong Kong middle class set for launch before end of 2018

  • First batch of flats forms part of drive to boost home ownership in city
  • Target audience is those too poor to afford a flat in world’s most expensive residential property market yet too rich to qualify for a public rental unit
PUBLISHED : Thursday, 25 October, 2018, 7:01am
UPDATED : Friday, 26 October, 2018, 4:05pm

A new kind of residence will be up for grabs among Hong Kong’s middle class later this year, as the government launches a “starter homes” scheme for those too poor to afford a flat in the world’s most expensive residential property market yet too rich to qualify for a public rental unit.

The first batch of “starter homes” – to be built by the Urban Renewal Authority – forms part of a drive to boost home ownership in the city. The authority on Tuesday approved eligibility criteria for the 450 flats it is to build in Kowloon. The project for first-time buyers will add a rung on the city’s housing ladder, but will it help solve the city’s housing crisis?

1. How many types of subsidised housing are there in Hong Kong?

With the new “starter homes”, there are now three forms of subsidised offerings for sale. The long-established Home Ownership Scheme (HOS) is open to families earning HK$60,000 (US$7,600) per month, or one-person households earning half that amount. HOS flats are sold at a market rate discount, determined by an affordability test using the median household income.

Those who are less well-off and are tenants of public rental housing can try the Green Form Subsidised Home Ownership Scheme, which was launched in 2016 to sell flats cheaper than those under the HOS. A pilot development in San Po Kong sold 857 flats and was oversubscribed by a factor of 18. Notably, Chief Executive Carrie Lam Cheng Yuet-ngor announced in her policy address this month more flats under this “green form” scheme would be built instead of public rental housing. She described the aim as satisfying people’s aspiration for home ownership.

2. Who benefits from “starter homes”?

The middle class stand to benefit, namely those who are too rich to qualify for the two existing schemes yet unable to afford a down payment in the private market. “Starter homes” will be open to individuals who have a monthly income of between HK$28,501 and HK$37,050, plus assets not exceeding HK$1.28 million. For households of two or more, monthly income should range between HK$57,001 and HK$74,100, with the ceiling on assets set at HK$2.55 million.

No publicly available data exists on how many households will qualify for starter homes. But according to official 2016 figures, some 40,717 households who were renting their homes earned between HK$60,000 and HK$79,999 per month, partly overlapping the scheme’s income limits. There were 16,596 individual tenants who earned between HK$25,000 and HK$39,999.

Flats in the Urban Renewal Authority’s project, located at Ma Tau Wai Road and Chun Tin Street, will measure between 260 and 510 sq ft. They are to be sold at discounts of up to 38 per cent of market rates, and owners are barred from reselling them for the first five years. Another draw is the guaranteed 90 per cent mortgage rate.

The second batch is located at a site on Kowloon’s Anderson Road and is yet to be sold. It will provide another 1,000 homes next year.

3. Will the new scheme make the middle class happy?

The scheme might appeal to people such as professionals, but it remains unclear how attractive it will be over the long term. Lam has made clear the government will not build these homes at the expense of other public housing. These homes will have to come from sites owned by private developers or must be bought from the government.

Up to 38 per cent discount on starter flats – but sale barred for 5 years

Those who are unsuccessful in the lucky draw in the case of oversubscription could still struggle to buy a home in the private market, despite a recent dip in property prices.

4. How do Hong Kong’s starter homes compare to their counterparts in Singapore?

A comparable scheme is called Executive Condominium – the most expensive of the publicly funded housing options in the Lion City. Similar to Hong Kong’s starter homes, ECs come with restrictions such as a minimum occupancy of five years and a levy assessed for resale. But EC buyers face more constraints: applicants must not own any overseas property, and they cannot sell the property to non-Singaporeans until 10 years after the development is completed.

5. Are there other ways to boost home ownership locally?

Our Hong Kong Foundation, an influential think tank founded by former chief executive Tung Chee-hwa, has called on the government to allow public housing tenants to buy their own homes, arguing this would be an immediate measure to boost home ownership. But officials have been reluctant to pursue the idea after a similar scheme launched two decades ago resulted in what was described as building management issues.

Former chief executive Leung Chun-ying in 2012 launched an initiative titled Hong Kong Property for Hong Kong People, but the policy was dropped four years later after the city saw fewer mainland Chinese snapping up flats locally.