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Property Leg-up

Hong Kong’s rapidly escalating property prices have led to a hue and cry over whether the city’s real estate is getting beyond the means of regular middle-class citizens. Several legislators have suggested that the government should reinstate plans such as the Home Ownership Scheme that are designed to make housing more affordable for first-time buyers.

In mid-March, the government took a small step in that direction. Secretary for Transport and Housing Eva Cheng announced that the Housing Authority would sell the surplus apartments left over from two of its programmes aimed at helping Hong Kongers to buy their own homes.

But the small number of flats involved means the measure is really a token move, designed more to show that the government is listening than anything. The Housing Authority will now put 4,000 flats left over from the Home Ownership Scheme back onto the property market, as well as another 374 flats from the Housing Society’s Sandwich Class Housing Scheme.

“The HOS is a small market, and quite a unique market, so I don’t think it will have a big impact on the general housing market,” says Jennifer Wong, a tax partner in KPMG’s Hong Kong office who specialises in real-estate issues.

So far, the government has resisted resuming the Home Ownership Scheme, which it put on hold in 2003, when Hong Kong’s property market was flailing through recession and SARS.

Opinion is highly divided as to whether the HOS should resume. Even some developers have favoured starting it up again, to ease social tension. But it’s probably just as well to keep it in the deep freeze.

Schemes like the HOS, which attaches strings to the apartments it sells, typically end up in forming a tiny “market within the market” of flats that can’t be freely bought and sold.

“It is really another class of housing,” says Wong. “You must meet certain stringent criteria before you can buy.”

The scheme gives preference to people who live in public housing, or who are eligible for it, called “green form” applicants. They are awarded four out of five of the homes that come on the market, with the other 20 percent set aside for “white form” applicants who are living in private housing but on low incomes.

Owners of HOS flats can sell their property after five years. But unless they sell the flat to a buyer who also qualifies for the scheme, they must pay a premium to the Housing Authority based on the prevailing market value of their home.


HOS owners who are looking to sell now complain that after they pay the premium, they are no longer able to afford a private flat of a similar size to their HOS place. In effect, they’re trapped by the rules on their subsidised housing into staying where they are. As a result, the government is now trying to figure out ways to revive the second-hand market for HOS flats.

It would be a much better idea to encourage first-time buyers by giving them incentives to buy in the open market, rather than in a designated kind of housing. Adding a whole new raft of buyers to the market will only drive prices higher, though.

The real underlying problem is that Hong Kong has seen relatively little new housing come on the market in recent years, and developers have had little incentive to build affordable housing when luxury property is going through the roof. It sounds like the government is aware of that, and won’t be bringing the HOS back any time soon.

“We gave serious thought to the matter when we made our decision back then,” Cheng said in announcing the sales. “It’s not something that we’ll alter easily. Currently our direction is correct, and many people agree that we should deal with the root of the problem from the supply side.”