In a report on the Chief Executive’s policy address in October, SAI KUNG BUZZ wrote that Carrie Lam “would never be forgiven”, along with her predecessors, for failing to sort the property market so middle-class people can afford to buy their own homes. That rather over-wrought phrase expresses the frustration of residents who can’t get into the world’s most unaffordable home market.
BUZZ asked the Transport and Housing Bureau for an interview on this lamentable state of affairs in October. Now they have come back a month later, refusing an interview, saying the assistant secretaries are all too busy. “A spokesman” did offer the brief below on what little they have been able to do to help the middle classes buy their own homes. In short what the Bureau is doing has no hope of solving the middle classes housing crisis. It is all too little too late.
To summarise key points:
- Subsidised sale flats that the lower or middle classes can apply for have been offered with mortgages of up to 90%. Only 13,000 of these SSFs have been made available in the past four years. Demand was “overwhelming”.
- In the next five years a further 26,300 such flats will be offered.
- A new scheme called “Starter Homes” is being tried. This is an Urban Renewal Authority project offering just 450 units in a pilot scheme.
- The Government is moving to increase land supply for housing. It is penalising developers who leave flats vacant and forcing them to sell.
BUZZ asked this question on mortgages: Given the gigantic financial reserves of the Government, its ability to lean on the banks and the excellent record of Hong Kong people in paying mortgages, why does Hong Kong not have mortgages of, say, 90 per cent. Dead silence.
If you have the patience to wade through it, here is the full briefing to BUZZ by “a spokesman” of the Transport and Housing Bureau. If you are not rich and you have a strong desire to own your own home, you have to move overseas. As so many have done before you.
TRANSPORT AND HOUSING BUREAU BRIEFING
Subsidised sale flats
1. In the past few years, due to tight local housing demand-supply balance and ultra-low interest rates in the global monetary environment, local property prices have been out of line with economic fundamentals, with heightened risk of a bubble. For some low to middle-income families, Home Ownership Scheme (HOS) flats and other forms of subsidised sale flats (SSFs) serve as their first step for home ownership.
2. In response to the home ownership aspirations of low to middle-income families, the Government announced in 2011 the resumption of HOS. Since 2014, the Hong Kong Housing Authority (HA) and the Hong Kong Housing Society (HKHS) have put up a total of around 13 000 new HOS / Subsidised Sale Flats Projects flats for pre-sale. The response was overwhelming. The Chief Executive has announced the revision of the pricing mechanism of HOS in June this year, introducing changes to the affordability test of the existing pricing mechanism. Together with the arrangement for buyers to obtain mortgage loans of up to 90% or even higher loan-to-value ratio, future HOS (as well as other SSFs) will be more affordable to the target households.
3. In the past, SSFs with premium unpaid in the Secondary Market used to be available for sale to Green Formers (mainly public rental housing (PRH) households and PRH applicants who have passed the detailed eligibility vetting) only. HA endorsed launching the White Form Secondary Market Scheme (WSM) on an on-going basis from 2018 onwards, allowing white form buyers to purchase SSFs with premium unpaid in the Secondary Market. The WSM 2018, with a quota of 2 500, was launched in March 2018.
4. The Government will continue to identify suitable sites and support HA and HKHS to implement HOS and other SSFs projects. According to the forecasts as at September 2018, in the five-year period from 2018/19 to 2022/23, the estimated total production of HA and HKHS’s SSFs (excluding Green Form Subsidised Home Ownership Scheme (GSH) flats) is about 26 300 units.
5. Apart from HOS and WSM administered by HA, the Government has also enriched the housing ladder by introducing “Starter Homes” (SH) which aims to help higher-income families which are not eligible for HOS and yet cannot afford private housing to meet their home ownership aspirations when property prices remain high. To test out the SH concept earlier, the Urban Renewal Authority has assigned its redevelopment project at Ma Tau Wai Road, which provides 450 SH units, as a SH pilot project. The pre-sale exercise of the project will be launched in December 2018 the soonest.
Private housing
6. Turning to private housing, the Government has adopted a two-pronged approach to address the overheated property market. First of all, the Government has adopted a supply-led strategy by continuing to increase land and housing supply with a view to addressing the demand-supply imbalance at source in the long run. With the Government’s sustained efforts in rolling out housing land, the medium-term supply of private housing has increased significantly. As at end-September 2018, the projected supply of first-hand residential properties for the coming three to four years is about 93 000 units. The average completions of private flats in the coming five years (i.e. 2018 to 2022) are projected to reach 20 800 units per year, an increase of around 50% over the annual average in the past five years (i.e. 2013 to 2017).
7. Although the supply of residential properties has been steadily increasing, it takes time for the supply to realise. We therefore need to introduce measures to manage the demand for housing so as to narrow the spectrum of buyers and redress the demand-supply imbalance in the short run.
8. The Government has introduced several rounds of demand-side management measures, namely the Special Stamp Duty (SSD) (first introduced in November 2010 and further enhanced in October 2012), the Buyer’s Stamp Duty (BSD) (October 2012), the Doubled ad valorem Stamp Duty (DSD) (February 2013) and the New Residential Stamp Duty (NRSD) (November 2016).
9. The policy objectives of the above demand-side management measures are to prevent even further exuberance in the housing market which may pose significant risks to our macroeconomic and financial sector stability; to ensure the healthy and stable development of the property market which is crucial to the sustainable development of Hong Kong as a whole; and to accord priority to the home ownership needs of Hong Kong permanent residents (HKPRs) in the midst of the tight housing supply situation.
10. The Government has repeatedly stressed that there is no single solution to all the problems related to the property market. We believe that local buyers with genuine home ownership needs will eventually benefit from these measures when most speculators, investors and non-local buyers are driven out of the property market.
11. The Government also announced two new housing initiatives in relation to the property market on 29 June 2018 aiming to encourage more timely supply of first-hand private residential flats. The two initiatives are the introduction of “Special Rates” on vacant first-hand private residential units, and amendment to the Lands Department (LandsD) Consent Scheme to improve sales practices.
Introducing “Special Rates” on vacant first-hand private residential units
12. The Government will amend the Rating Ordinance (Cap.116) to introduce “Special Rates” on vacant first-hand private residential units. The amendment will require owners (mainly developers) of first-hand private residential units with the Occupation Permit (OP) issued for 12 months or more to furnish annual returns to the Government on occupancy status of the units. Units that have not been occupied or rented out for more than six months during the past 12 months will be considered as vacant and subject to “Special Rates”. “Special Rates” will be collected annually at two times (i.e. 200%) the rateable value of the units concerned.
13. The Government plans to introduce an Amendment Bill into the Legislative Council (LegCo) during the 2018-19 legislative session. ”Special Rates” will take effect after gazettal of the Amendment Ordinance following passage of the Amendment Bill in LegCo. Although “Special Rates” has yet to be introduced, we note that developers have become more proactive in selling their first-hand private flats in completed projects since the announcement of the new initiatives.
Amending the Lands Department Consent Scheme (Consent Scheme) to improve sales practices
14. To improve market transparency and enhance consumer protection, the Government has amended the Consent Scheme, requiring developers to offer for sale no less than 20% of the total number of residential units subject to the relevant pre-sale consent at each turn of sale, regardless of the sales method (including tender and auction). If the remaining unsold residential units are less than 20%, the developer has to offer for sale all remaining units in one go. This new requirement has come into effect on 29 June 2018, and applies to pre-sale consent applications being processed by LandsD at that time and all new applications received after that date. Since the implementation of the new requirement, as at 30 September 2018, LandsD has issued 12 pre-sale consents for residential developments involving 6 979 residential units, which is a record-high figure since the first quarter of 2005.
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