Property

Huge housing demand calls for flexible cooling measures

The application phase for two of the Hong Kong Housing Society's subsidised housing estates finished last month. The two estates, located in the New Territories, Tuen Mun and Tseung Kwan O, offers a combined 600 flats and attracted close to 88,000 applications, 141 times more than the number of units available. This reflects the biggest demand-supply ratio for a housing project in the history of the Housing Society.

More astoundingly, 99% percent of the applicants are White Form buyers. With 310 White Form units offered by the two estates, it means only one applicant out of every 281 will be able to get a flat, which sounds as unlikely as winning the lottery.

I believe that the low 10% down payment rate and the affordable HK$2.2 to 6.23 million price range are the main reasons why these flats are popular amongst White Form buyers. Since the introduction of cooling measures in 2010, the biggest obstacle faced by buyers is the increasingly large down payment. It has also prompted many developers to offer mortgage loans that reduces the down payment rate to 20%. However, developers are not in the business of taking losses; naturally, property prices are not going to be cheap, and the interest rate will also increase overtime. Recently, a development in the Western District asked for HK$10 million for a one-bedroom apartment.

That’s not even remotely affordable for an ordinary family. Due to the cooling measures, the secondary market, usually the main destination for first-time homebuyers, now requires an even higher down payment rate. In particular, a down payment of 40% of the property price is required for units selling for HK$6 million or more. Without a big handout from parents, it’s virtually impossible for first-time homebuyers to fork out so much money. 

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In addition, banks are now ordered by the Hong Kong Monetary Authority to conduct stress tests, making it extremely difficult for homeowners to acquire bridging loans from the bank. Properties priced at over HK$6 million have become an invisible wall for both first-time buyers and those looking to change homes. And with few options below the HK$6 million price tag, buyers have to put their hope into subsidised housing. In the past seven years, the cooling measures did nothing to lower the demand. All it has achieved is twisting the market, causing a decreased housing supply in the secondary market by making it challenging for existing homeowners looking for home upgrades. This has deeply affected first-time homebuyers.

Although the housing policies in Lam’s new Policy Address have good intentions, they are not reflected in specific policies, and will be of little help, or will even make the situation worse. It is crucial for the government to adjust cooling measures as soon as possible. Like Paul Chan Mo-po said, the question shouldn’t be whether to reinforce or curtail the cooling measures, but how they can be adapted to correctly respond to the market demand. A revitalised secondary market can mitigate unchecked housing price hikes; and if we can increase supply on top of that, maybe there will finally be hope for Hongkongers to have a stable and affordable housing market.

possible. Like Paul Chan Mo-po said, the question shouldn’t be whether to reinforce or curtail the cooling measures, but how they can be adapted to correctly respond to the market demand. A revitalised secondary market can mitigate unchecked housing price hikes; and if we can increase supply on top of that, maybe there will finally be hope for Hongkongers to have a stable and affordable housing market.

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