2024-02-14 20:30:18
C’s point of view｜Private property prices fall and Home Ownership Scheme housing loses its function
The emergence of HOS is because there is a group of people in society whose income makes them ineligible to apply for public housing; however, their income is not enough to support home ownership in the private market; in this case, the only option is to Private market rentals. However, because there are not many units available for rent in the private market, the rent has risen to an unreasonable level. It has become not only more expensive than public housing, but also more expensive than the monthly payment of private housing (based on housing expenditure as a percentage of household income). Proportion). The society feels that it is unfair to them, so HOS housing is specially designed to reduce their housing expenses and allow a certain proportion of family income to be used to improve life needs other than housing.
When setting the selling price of residential housing, the Housing Authority usually follows the following criteria: (i) First, based on the average income level of HOS applicants, determine the proportion of their income that they are qualified to use to finance the housing, that is, Their ability to afford the property price; (ii) Then determine the selling price of the HOS flat based on their ability to afford the property price; (iii) This selling price is usually lower than the property price in the private market, so that the purchase price of the HOS flat can be calculated What proportion of the price discount did people actually get; (iv) If future HOS owners want to sell their flats in the private market, they will have to pay the Housing Authority the land price based on the original discount proportion; (v) When the price of private housing is high, the discount provided by the Housing Authority will be higher. When the price of private housing is low, the discount provided by the Housing Authority will be lower. The average discount ratio is around 40%.
This mechanism has always worked very well. The problem is that the selling prices of private properties in Hong Kong have continued to decline in recent years, with the average price falling by nearly 25%, and some falling by more than 30%. Some older apartments have been sold for more than NT$3 million, and the price per square foot is only regarding NT$7,000, which is not far from the price of HOS flats.
At present, the decline in property prices in Hong Kong has not stopped. If property prices are allowed to fall further, sooner or later they will fall to the point where even people who might only apply for Home Ownership Scheme housing can afford them. Under such circumstances, the Housing Authority no longer needs to provide discounts to HOS buyers, which greatly reduces the attractiveness of HOS flats. If there are too many restrictions, people who need to buy a property may prefer to buy a private property rather than a HOS flat. In the 1980s, some Home Ownership Scheme flats in Butterfly Garden, Tuen Mun, were forced to be sold in the private market at market prices. There was no need to review the buyer’s qualifications, and they were not subject to transfer restrictions.
It should be a good thing that property prices can fall back to a level that ordinary people can afford. This means that Hong Kong can fulfill the mission of home ownership through market mechanisms, which is better than relying on the Housing Authority to draw lots. The problem is that the Housing Authority has long relied on the proceeds from the development of Home Ownership Scheme housing to subsidize public housing expenditures. If the income from Home Ownership Scheme housing is lost, the Housing Authority will find it difficult to balance its expenditures and will have to use public funds to build public housing and provide daily operating expenses. Now that the government’s finances are tight, how can we deal with this new expenditure?
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