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Hong Kong housing

Hong Kong starter homes to be sold with up to 38 per cent discount – but buyers can’t sell for 5 years, Urban Renewal Authority says

  • Project in Ma Tau Wai will provide about 450 flats, measuring 260 to 510 sq ft
PUBLISHED : Tuesday, 23 October, 2018, 8:52pm
UPDATED : Tuesday, 23 October, 2018, 11:22pm

Flats at the Hong Kong Urban Renewal Authority’s new “starter home” project in Ma Tau Wai will be sold at discounts of up to 38 per cent and owners will be barred from reselling them in the first five years.

Among a raft of measures to help more people get on property ladder, Chief Executive Carrie Lam Cheng Yuet-ngor in June invited the statutory body to use the site for starter homes as part of a new pilot scheme. The authority approved the project in July.

The aim was to support the government’s initiatives in assisting prospective homebuyers who did not qualify for subsidised flats but could not afford private homes.

“After the first five years, ‘starter home’ owners can pay the land premium to the [authority] and sell or rent their flats in the open market,” the authority said, following a meeting of its board on Tuesday.

The project on Ma Tau Wai Road and Chun Tin Street covers a total gross floor area of 29,000 square feet and will provide about 450 flats to be sold as starter homes, measuring 260 to 510 sq ft.

During the meeting, the authority said prices would be set 28 to 38 per cent lower than market rates.

To follow movements in the market more closely, details on the finalised rate and applications would be announced later this year, the authority said.

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A 28-month bull run in the property market came to an end in August.

The discounts are about 10 to 20 percentage points less than what is typically offered for subsidised government flats. But unlike the subsidised home market, owners cannot sell flats back to the authority or to other eligible purchasers in the secondary market, premium-free.

Eligible applicants must be Hong Kong residents who have never owned property. Income levels must fall between HK$28,501 and HK$37,050 for individuals, and HK$57,001 and HK$74,100 for households of two or more. Asset limits are set at HK$1.28 million and HK$2.55 million respectively.

Buyers will be able to obtain bank loans of up to 90 per cent of the value of the property, with about one-third covered by the Hong Kong Mortgage Corporation.

Pro-establishment lawmaker Alice Mak Mei-kuen, a non-executive director on the authority board, said the five-year resale period was too short and unlikely to deter speculation by those looking to flip flats for profit. She suggested increasing the resale restriction to 10 years.

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But Dr Billy Mak Sui-choi of Baptist University business school said buyers should be given more flexibility.

“It depends how you look at it, if we all assume the property market will continue to go up, then five years might be too short, but if it drops, five years is too long,” said the academic, a former non-executive director on the board.

“A homeowner may get sick, lose their job or for whatever special reason, need to cash out. Will they be allowed to sell at market price? Will the URA absorb the difference? There needs to be some sort of established mechanism.”

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He believed the deal was appealing, particularly for middle-class professionals who could not afford a down payment, but easily manage monthly mortgage payments.

“The price is attractive, but the discount is not the main draw; it’s the guaranteed 90 per cent mortgage,” he said. “This would make the flats more affordable to more people.”