New Home Ownership Scheme measure a boost for housing market in Hong Kong
Move lets so-called sandwich class in Hong Kong buy subsidised flats, and serves as incentive for owners of such flats to sell
Premium is a word with multiple meaning. In the insurance industry, a premium is the monthly or annual financial cost for obtaining insurance coverage. In the financial world, a premium may refer to the monetary difference between a future and a spot price. And in the property market, it is the common term to describe an amount paid above what is regarded as a normal price.
Under the Home Ownership Scheme (HOS), a premium is the fee paid to the Housing Authority by the owners of the subsidised HOS flats to secure the right to sell their properties on the open market.
It was this notion of a premium that came under the spotlight in mid-July when the government announced a plan to let 5,000 eligible applicants buy "premium-not-yet-paid" HOS flats next year. Those qualified are so-called sandwich-class buyers - those with family incomes below HK$30,000 a month.
In essence, this proposal provides more options for such sandwich-class buyers whose earnings are too high to apply for public rental housing, but too low to afford private flats. Since the proposal was made, the market has responded positively and some of the "premium not-yet-paid" HOS flats were even reported to have been sold at a premium.
In my view, however, this plan will boost turnover of such flats rather than price in the long term. As a first step by the new administration in the housing sector, the new measure is leading the housing market in the right direction.
The measure has been hailed by most market participants for several reasons.