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A Brief History of the Home Ownership Scheme

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As Hong Kong’s housing prices continue to soar and unit sizes keep shrinking, the more affordable Home Ownership Scheme (HOS) flats have naturally attracted a lot of buying interest. Looking back, Phase 1 of the HOS, introduced in 1978, consisted of six estates, namely Chun Man Court in Ho Man Tin, Yuet Lai Court in Kwai Chung, Shun Chi Court in Kwun Tong, Shan Tsui Court in Chai Wan, Yue Fai Court in Aberdeen and Sui Wo Court in Sha Tin, priced at HK$90,500 to $165,900. HOS flats from Phase 1 to Phase 3(A) did not have resale restrictions; the original selling prices merely covered the construction costs, and owners didn’t have to pay a premium when reselling the property. Following that, HOS flat prices were then based on the commercial property market, with the government offering HOS flats at 30% to 60% of the assessed market rate. When housing prices peak and become unaffordable for home seekers, the government will lower the percentage accordingly, so HOS flats become affordable again to those eligible for them.  

This happened in 1997 when housing prices skyrocketed, and HOS flats were sold at 60% of the market rate. However, a higher percentage of current market rates also means paying a higher premium in the future. When Phase 19(C) of the HOS was on sale in 1998, buyers could choose to purchase flats at 40%, 50% (standard) or 60% of the market rate. In addition, the Housing Authority will only resell flats after they have bought them back, so the resale dates could be different for flats in the same estate, and so are the percentages offered. Take Tin Shing Court in Tin Shui Wai for example; the resale prices were between 47% and 81% of the market rate which is a sizeable difference.

When buying homes in the HOS secondary market, two similar units selling at the same price could have vastly different discount rates. That means that the premiums required when reselling the two properties in the future will be very different too—something that HOS buyers have to think carefully about.

Although the HOS is designed for lower income citizens, who can’t afford commercial housing, to be able to own a home for personal use, the general investment market does play a pivotal role in the sale of HOS flats. When the housing market is on the rise, HOS prices go up accordingly with the market rate, and yet that doesn’t deter prospective buyers at all. For example, the latest phase of the HOS has received 16,000 applications—36 times the number of flats offered.
In contrast, when the housing market hit a low in 2002, HOS flats had so little interest from the public that the government put off HOS offerings indefinitely, and didn’t reopen the scheme for applications until 2014. 

After the resumption of the HOS, the ‘White Form Secondary Market Scheme’ and the ‘Green Form Subsidised Home Ownership Scheme’ were also introduced, as well as the traditional White Form and Green Form statuses. When a new batch of HOS flats are on sale, the White Form to Green Form ratio is typically 5:5; however, the number of White Form applicants far exceeds that of the Green Form, making it significantly harder to win the White Form lottery. Therefore, White Form applicants should also apply for the ‘White Form Secondary Market Scheme’ in order to increase their chances. It’s important to seize this opportunity because once their income increases, they will no longer be eligible for the White Form scheme.