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LCQ7: Home Ownership Scheme Secondary Market

     Following is a question by the Hon Vincent Fang, and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (June 26):


     The Government launched this year a scheme with a quota of 5 000 under which eligible White Form applicants for the Home Ownership Scheme (HOS) may purchase, without paying premium, flats on the HOS Secondary Market (Secondary Market) within a specified period. It has been reported that the first batch of 2 500 successful applicants are anxious to purchase HOS flats, but the per-square-foot prices of HOS flats have risen rapidly due to an insufficient supply of such flats. The per-square-foot prices of certain flats have risen more than 20% since the announcement of the scheme in last July. The per-square-foot prices of some flats, after reckoning the premium payment, have even surpassed those of private residential flats. For example, the per-square-foot price of an HOS flat in Tseung Kwan O in the Secondary Market based on its saleable area is some $6,400, meaning its per-square-foot price at the market value is over $10,000. There are comments that a bubble is forming in the Secondary Market and this has driven the prices of some private residential flats to go up, which is detrimental to the healthy development of Hong Kong's property market and may make successful applicants bear a higher risk in purchasing HOS flats. In this connection, will the Government inform this Council:

(a) whether it had, before launching the aforesaid scheme, assessed if the supply of flats in the Secondary Market was adequate to meet the demand of both Green Form and White Form HOS applicants; if it had assessed, of a detailed breakdown of the estimated supply of HOS flats by district; if not, the reasons for that;

(b) whether it will review the implementation of the aforesaid scheme, including its relationship with the rapid rise in the prices of HOS flats in the Secondary Market, the rate of increase in the prices of such flats over the past six months, the affordability of the successful applicants, the impact on the market of private residential flats, etc.; if it will, of the timetable and plan of the review; if not, the reasons for that; and

(c) whether the Government will temporarily shelve the aforesaid scheme after allocation of the second batch of 2 500 of this year's quota, so as to avoid the development of a bubble in the Secondary Market intensifying, and successful applicants bearing unnecessary risks of a property bubble; if it will, of the specific timetable and plan; if not, the reasons for that?



     The Government is aware of the aspirations for home ownership in the community. We also understand that some people look to Home Ownership Scheme (HOS) flats as their first step towards home ownership. To this end, the development of HOS is already part of our housing policy. Our planning target is to provide some 17 000 HOS flats over four years starting from 2016/17 onwards and thereafter an annual average of 5 000 HOS flats. The first batch of about 2 100 HOS units to be completed in 2016/17 are expected to be released for pre-sale by the end of 2014.

     In response to the home ownership aspiration of those with White Form (WF) status during the interim period from now until the first batch of new HOS flats are completed in 2016/17, we have introduced an interim scheme whereby 5 000 WF buyers each year will have a chance to purchase HOS flats with premium not yet paid. The scheme can also facilitate the turnover of HOS flats, thereby revitalising the HOS Secondary Market. It also addresses the community's previous request in this regard.

     The consolidated reply to Hon Vincent Fang's three-part question is as follows:

     When the interim scheme was formulated, reference was drawn from the long-term planning target which is to provide about 5 000 HOS flats annually. As such, we have decided to allow 5 000 WF buyers to purchase second-hand subsidised sale flats with premium not yet paid before the first batch of new HOS flats are completed in 2016/17, to address the home ownership needs of eligible people as soon as possible.

     As to the supply of flats on the HOS Secondary Market, it is affected by many factors, such as the preference of the flat owners, transaction prices and market sentiment, etc. As at the first quarter of 2013, there were about 253 000 HOS flats, 122 000 Tenants Purchase Scheme (TPS) flats and 9 100 Flat-for-Sale Scheme (FFSS) flats under the Hong Kong Housing Society with premium not yet paid in Hong Kong. Flats with premium not yet paid may, in principle, be traded on the Secondary Market. Nonetheless, it is for the individual owners to decide whether, and if so when, they would sell their flats. We are unable to ascertain their wishes. This is also a characteristic of the Secondary Market, which is not the same as the first-hand sale market.

     As regards prices, we have been monitoring the price changes in the property market closely. We note that under the current environment with low interest rate and abundant liquidity, the overall property prices (including the transaction prices of second-hand HOS flats) have remained high. The community is also concerned about the increase in prices of second-hand HOS flats with premium not yet paid. However, changes in property prices (including the changes in prices of HOS flats with premium not yet paid on the Secondary Market) are affected by many factors, such as the supply of residential flats, the volume of transactions, the situation of mortgage lending, interest rates, the affordability of those who wish to buy, the economic situation, people's expectations regarding the prospect of the market, as well as any measures that the Government may take that impact on the market. It is simply not safe to come to the conclusion that the changes in the prices of second-hand HOS flats arise simply due to the implementation of the interim scheme.

     We have divided the quota of 5 000 into two batches of 2 500, so that the market can absorb the increase in potential buyers in a gradual and managed manner. Moreover, to address the community's concerns on possible speculative activities on the Secondary Market as a corollary of the interim scheme, we have also introduced resale restrictions for WF buyers under the HOS Secondary Market Scheme.  In the first two years after the transaction, WF buyers cannot sell their flats on the HOS Secondary Market. From the third year onwards, they can sell their HOS flats with premium not yet paid to eligible persons as certified by the Hong Kong Housing Authority (HA). After the WF buyers purchase their flats, if they want to sell their flats on the open market, they need to pay the premium first. The resale restrictions are set by drawing reference from the resale restrictions for current HOS flats. The current resale restriction made reference to the HA's resale restriction on HOS, and is known to the public, easy to understand and is widely accepted. Furthermore, the Government has also put in place specific measures (notably, the Special Stamp Duty) to curb speculation.

     The interim scheme is still at an early phase of implementation. The HA has just issued approval letters to the first batch of 2 500 successful applicants on May 31. The Certificate for Eligibility to Purchase (CEP) obtained by the successful applicants is valid for six months, but a one-off renewal for another six months upon its expiry may be obtained. As to the remaining 2 500 successful applicants, HA will issue approval letters by the end of December. In other words, the CEP for the 5 000 successful applicants will expire by the end of 2014 at the latest. We will keep in view the implementation of the interim scheme, and evaluate the effectiveness of the scheme based on the response of the applicants and the market before deciding whether to launch a new round of the scheme. Moreover, the Government has been reminding all buyers of residential properties to exercise caution and should make the relevant decisions based on their own affordability.

Ends/Wednesday, June 26, 2013
Issued at HKT 12:46


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