The pros and cons of Starter Homes

The pros and cons of starter homes

As one of the most densely populated cities in the world, Hong Kong isn’t necessarily a very liveable place for many people. Despite this, the great opportunities that Hong Kong has to offer are continuously attracting locals and expats to move or stay here in pursuit of their career.

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However, the ever growing population has caused the housing supply to chronically lag behind the demand. For a lot of Hong Kong residents, home prices are far from affordable, and rents are rising rapidly due to the increasing demand. It is no surprise that those who have a decent amount of savings are eager to become home owners.

An old friend familiar with the local housing market tells me that he believes the Starter Homes scheme is a constructive plan. He has noticed in the past few days, authorities have shared with the public the details of the scheme - clearly testing the public’s opinion on the matter. Since the scheme is beneficial overall, most public responses have been very positive, leaving only a few doubters. He thinks the overwhelmingly supportive reaction is a sign of danger, as it may encourage the Government to roll out the scheme without comprehensive assessments, which in turn may lead to subsequent and unexpected repercussions.

He points out that the prices of flats in the Home Ownership Scheme and the Green Form Subsidised Home Ownership Pilot Scheme are all set based on the market rate. Meanwhile, according to the Government, the Starter Homes scheme may offer prices lower than half the market rate.

If Hong Kong housing prices continue to soar, in just a few years, the profit difference between selling a Starter Homes flat and a similar sized non-scheme flat in the same neighbourhood will be substantial. This could very well make owners of Starter Homes feel like they have been unfairly treated, or even cheated.

Things can be worse. Since the price of a Tenant Purchase Scheme (TPS) flat is set using the market rate as a reference, a TPS unit could be sold at a higher price than a Starter Homes flat of similar size in the same area. That would be an awkward scenario bound to trigger fierce public debate.

Personally, I think that the Government should be extremely cautious and meticulous in differentiating investment properties and owner-occupant properties. In order for home seekers to make the best decision for themselves, the authorities have the responsibility of laying out all the pros and cons of both types of properties to the public.

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