Unaffordable housing prices are a key reason why we are losing talents. This is also an impediment to our drive to attract talents.
We cannot and should not, however, introduce any policy to drastically reduce housing prices, because over 50 percent of our households are homeowners. Many are still struggling to repay their mortgage loans. A large decline in housing prices may produce many negative-equity cases and plunge our economy into a recession. Fiscal revenues would decline, and some homeowners might even lose their jobs and then their homes.
However, we can follow Singapore’s example in developing homes to be sold to Hong Kong permanent residents and newcomers who would commit to staying in Hong Kong for at least seven years. These homes cannot follow Singapore’s example in terms of size and quality. Instead, they should be “basic but decent” homes developed on sites whose per-square-foot usable-area land cost is lower than the median. This means that they should not be built in prime locations that are very attractive. This is partly in order to reduce the cost to the government, and partly to encourage their buyers to trade up for better homes when they are financially able to do so.
Singapore’s Housing Development Board housing is open to all Singaporeans and permanent residents without the need for a means test. I would propose that under the “New Home Ownership Scheme”, a purchase should be open to Hong Kong permanent residents and newcomers who would commit to staying in Hong Kong for at least seven years. Moreover, I would propose that they could be resold at any time without the need to repay the owed land premium. But one key condition applies: Buyers must live in the flats and must not own any other property in Hong Kong. By implication, the unit must never be rented out to other people. The basic flat would have an area of about 400 square feet (37.2 square meters), and would be sold at, on average, eight times the annual median household income of economically active households in Hong Kong. Units in better locations would be priced higher, and those in less-desirable locations would be priced lower. The terms would screen out all those who are financially able to buy flats in the private market.
A key problem with the HOS flats under the current system is that they are extremely attractive investment tools. People who buy HOS flats often pocket a huge profit because buyers are able to buy from the Housing Authority (HA) at deeply discounted prices, and because they can be resold without paying the owed land premium to Green Form buyers. One HOS flat in Kai Long Court in the Kai Tak area bought from the HA for HK$3.303 million ($420,800) in 2019 was sold to a Green Form buyer for HK$6.8 million in February 2023. The huge profit of nearly HK$3.5 million was possible in part because the development was in a prime location that is much sought-after; in part because the initial discount was very deep; and finally, because many Green Form applicants have strong purchasing power. This begs the question of whether the government did the right thing by marking down the prices so much, given that HOS units were already many times oversubscribed.
What is most ironic is that a recently aired TV feature program discovered that some HOS buyers, having bought the much-sought-after flats from the HA, left them vacant until three years have passed so they could pocket the huge profit without having to pay the Special Stamp Duty (SSD). In addition to cutting down the secondhand supply of existing flats and driving prices through the roof, the SSD helped create waste!
Recently, one of the suspects associated with a murder case was found to own a luxury flat in Kadoorie Hill in Ho Man Tin in 2019, yet was able to use the Green Form status to purchase an HOS flat in Kwai Chung the following year. Although the privilege to buy an HOS flat using the Green Form is not conditional on income or asset limits, public rental housing tenants today are not supposed to own other flats. Once discovered, tenants can be evicted. The Green Form status would then be void. The case shows that the HA was not doing due diligence.
There is little doubt that the profit motive is one of the drivers for the great demand for HOS housing. Since the Green Form is also worth much money, it is also a huge lure for people to apply for public rental housing. The HA needs to ensure that PRH tenants do not own properties in Hong Kong, even within the first 10 years of tenancy, since many people are still waiting in line. We need to end the profit motive for PRH housing as well as for HOS housing.
The design of the “New Home Ownership Scheme” housing should be basic and decent, so that young couples with a middle-class income could afford to buy them, and they would need to be big enough to raise kids in. If they want better-quality homes at better locations, they should vacate and buy elsewhere. That would keep the drive to improve their livelihoods on their own alive. The plan is feasible because the cost would be kept low and, unlike the current HOS, would not attract profit seekers.
The author is the director of the Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University.
The views do not necessarily reflect those of China Daily.