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Hong Kong housing
OpinionComment
Lucy Kwan
Alexis Wong
Lucy KwanandAlexis Wong

Opinion | To turbocharge home ownership, Hong Kong needs a new subsidised housing scheme

  • Subsidised housing prices should be tied to household income, not land premiums, to give more families home ownership opportunities
  • Allowing more people to buy their own homes would ease the government’s burden of providing public rental housing – and boost the economy

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Illustration: Craig Stephens
Lucy KwanandAlexis Wong
Attempts to solve Hong Kong’s long-standing housing shortage problem have so far fallen short. In the hope of addressing this issue once and for all, we propose a new kind of home ownership scheme aimed at rebalancing the public and private housing supplies – and ultimately ensuring residents’ right to adequate housing, as recognised by the United Nations.
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Apartments under our “New Home Ownership Scheme” (NHOS) would be priced without land premiums being factored in, and instead, according to household income levels. As only construction costs would be counted, we envisage that flats of various sizes could be priced at between HK$1 million (US$130,000) and HK$3.5 million, with a mortgage-income ratio of about 30 per cent.

With regard to annual completion of flats, the emphasis would be on building more NHOS units and giving more home ownership opportunities to the sandwich class, currently shut out by skyrocketing prices and from existing subsidised housing schemes. Fewer public rental and private housing units would need to be built, leaving total investment in the property sector intact.

The new scheme would also cater to different living space needs (say, from 450 sq ft to 900 sq ft) at different stages of life and would allow buyers to move twice (to a bigger or smaller unit). New flats would be sold at prices covering the construction costs but requiring a minimum down payment, so that practically any household in the middle-income range of HK$20,000 to HK$75,000 could benefit from the scheme.

Assuming a 20-year mortgage at a 90 per cent loan-value ratio, with a 3 per cent per annum interest rate, and a price of 115 per cent of the estimated construction cost of HK$2,070 per sq ft, we arrive at a selling price of between HK$1 million and HK$3.5 million, with mortgage payments comfortably commensurate with income.

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Currently, the government sets the discount rate for Home Ownership Scheme (HOS) flats at around 30 to 60 per cent of the market value, to balance the buyer’s income and mortgage payment ratio. With rising prices, earlier buyers may feel short-changed as later buyers enjoy bigger discounts.

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