At the end of last year, the government made it clear that new housing developments planned for the next decade would have a public-private unit ratio of 7:3. This means that the supply of public, Green Form and Home Ownership Scheme (HOS) housing will be ramped up and the public will be able to purchase subsidised housing at higher discount rates. However, this doesn’t change the fact that housing supply has not and will not catch up with the massive demand, and applicants’ chances at winning the lucky draw are still extremely slim. Hoping to improve the city’s home ownership rate, the government launched the White Form Secondary Market Scheme (WFS) in recent years. At present, the scheme has a yearly quota of 2,500, and those who have been granted purchase permits can take their pick from secondary HOS units in all 18 districts. By giving buyers a lot of flexibility and freedom of choice, the WFS has been very well received by the public.

The secondary HOS market, much like the private housing market, has seen its fair share of new sales records over the past couple of years. Several high-quality HOS units were sold at staggering prices of over HK$10 million, causing backlash and criticism, with some blaming the WFS as a major culprit for the soaring home prices.

The reason behind such high prices in the public housing market is not that HOS home owners are reluctant to sell and are driving down the supply. The root of the problem actually lies in the guarantee period set by the Housing Authority. The guarantee period rule, which hasn’t changed since its initial introduction, stipulates that for buildings aged 25 years or under, home buyers are guaranteed to get a mortgage with a loan-to-value ratio of up to 95%.

Take Fu Keung Court in Lok Fu, for example. The estate consists of six blocks, and the guarantee period for three of them has not yet expired, which means that purchasers can borrow up to 95% of the purchase price of the flats. The other three blocks are over 25 years old, so Green Form buyers can only borrow up to 60%. The six blocks were built two or three years apart, yet because of the current guarantee period, the down payment amount for these flats can vary by over 100%. Naturally, some buyers would rather pay a slightly higher overall price in exchange for a much smaller down payment. The result is a bizarre phenomenon where, within an estate, some blocks keep setting new price records while others receive little interest from buyers.

There is no doubt that when the guarantee period was first set, it was meant to make it easier for the public to make home purchases. However, as public housing developments age over time, a guarantee period that remains unadjusted only puts a heavier burden on Green Form buyers. While this policy was introduced with good intention, it unfortunately has become a booster for the rising HOS prices.