Chapter 12: Home Ownership

Owning one's home is an aspiration shared by many in the community. Promotion of home ownership helps to foster social stability and a sense of belonging. The Government provides a variety of subsidised home ownership schemes and loan schemes through the HKHA and the HKHS to enable eligible families to buy their own homes. The target is to achieve an overall home ownership rate of 70 per cent by 2007, compared with 55 per cent in 2001.

Home Ownership Scheme, Private Sector Participation Scheme and Flats for Sale Scheme

The HOS and PSPS were introduced by the HKHA in 1978 and 1979 respectively, to assist low and middle income households to purchase homes at discounted prices. About 310 738 flats have been sold so far to eligible households. In 2001, 7 906 flats and 4 740 flats were sold under the HOS and PSPS respectively, and the sale exercises were three times over-subscribed on average.

In 1987, the HKHS implemented the Flats for Sale Scheme (FFSS) to complement the HOS and PSPS. So far, 9 200 flats have been built.

Applicants under the HOS, PSPS and FFSS fall into two categories: Green Form and White Form. White Form applicants (mainly living in private sector housing) are subject to a domestic property restriction, net asset limits and income limits. These restrictions do not apply to Green Form applicants who are principally public rental housing tenants, residents of Cottage Areas and interim housing managed by the HKHA, households displaced by the clearance of squatter areas for development, and victims of natural disasters.

Affordability is the primary consideration in determining the price of HOS, PSPS and FFSS flats. In the case of subsidised home ownership flats built by the HKHA, sale prices also reflect the Government's granting of land at reduced or nominal premium. Prices in each sale exercise reflect a discount from the assessed market value of the flats.

The Secondary Market Scheme was established by the HKHA and the HKHS in 1997 for the resale of subsidised home ownership flats, starting from the third year after first assignment, to sitting public rental housing tenants and Green Form Certificate holders. Flat prices are freely negotiated between the parties involved, subject to the transfer of premium liability to new purchasers. Since then, 21 221 applications for sale and 17 430 applications for purchase have been received; 12 274 transactions have been completed and 10 080 public rental housing flats have been recovered.

HOS, PSPS and FFSS flat owners may sell their flats in the open market starting from the sixth year after first assignment, subject to payment of a premium calculated with reference to the prevailing market value of the property and the original purchase discount.

The Sandwich Class Housing Scheme, comprising a Main Scheme and a Loan Scheme and administered by the HKHS, was introduced in 1993 to help middle income families to buy their own homes.

The Main Scheme involved the construction of flats which were sold to eligible applicants at discounted prices subject to a five-year resale restriction. Land was granted to the HKHS on concessionary terms but all other development costs were borne by the HKHS. So far, 8 920 flats have been completed. As property prices have dropped substantially and many private sector flats are now within the reach of middle income families, the Main Scheme has been suspended since October 1998.

The Loan Scheme provided subsidised loans to eligible households to enable them to buy their own homes in the private sector: 5 701 loans amounting to $2.7 billion were granted. The Loan Scheme was abolished in April 1999 following a review of subsidised housing loan schemes. Eligible households may continue to obtain loans under the Home Starter Loan Scheme (HSLS) and the HPLS.

The HPLS was introduced by the HKHA in 1988 to assist low income households to purchase flats in the private sector. The Green Form applicants of the HPLS can also make use of the loan or the subsidy to purchase flats in the HOS secondary market. Eligible households are offered an interest-free loan of up to $660,000, or a monthly subsidy of up to $4,200 for 48 months, to purchase their own homes. Eligible White Form households are offered an interest-free loan of up to $410,000, or a monthly subsidy of up to $2,800 for 48 months. So far, 44 654 loans and 2 685 subsidies have been granted.

A quota of 4 500 loans was initially set for 2001-02 to cater solely for Green Form applicants. After the imposition of the moratorium on sales of HOS flats, the HKHA provided additional quota of 12 000 HPLS to be shared equally between Green Form and White Form applicants. The maximum loan amount for White Form applicants is $410,000.

The HSLS was launched in April 1998 by the HKHS on behalf of the Government to help families to buy their own homes for the first time. The scheme has been extended since December 1999 to cover single persons under 60 years of age. Successful applicants with families receive a low-interest loan of up to $600,000 ($300,000 in the case of single persons) or 30 per cent of the property price, whichever is lower. Up to the end of 2001, about 26 000 loans were drawn down, including 5 400 loans for single persons.

The Tenants Purchase Scheme, announced in December 1997, will provide the opportunity for at least 250 000 households living in public rental housing to buy their flats at reasonable and affordable prices over a 10-year period up to 2007. This arrangement will make a significant contribution to increasing home ownership in Hong Kong.

Since January 1998, 107 900 flats have been offered for sale, and 70 596 households have bought flats under the scheme.

In 1999, the HSLS was extended to cover single persons. To cater for increasing demand, the HKHA has, since December 1999, also allowed White Form singleton applicants to buy HOS and PSPS flats or to join the HPLS. So far, 7 384 single persons have successfully purchased flats under the HOS and PSPS, and 909 have obtained HPLS loans/subsidy.

The Mortgage Subsidy Scheme was implemented in September 1998 to promote home ownership among tenants affected by the HKHA's Comprehensive Redevelopment Programme and households affected by Cottage Area clearance exercises. Under the scheme, eligible applicants buying HOS or PSPS flats are given a mortgage subsidy of up to $162,000 over a period of six years. So far, 3 350 households have bought homes with this subsidy.

The Buy or Rent Option (BRO) was launched by the HKHA in July 1999 to allow prospective public rental housing tenants the option of buying rental flats when their turn comes for flat allocation. This initiative is also open to tenants affected by redevelopment and clearances as well as eligible junior civil servants. An eligible purchaser may opt to receive a mortgage subsidy of up to $162,000 over a period of six years. In 2001, about 500 eligible BRO applicants received mortgage subsidies to buy their homes. So far, about 2 000 households have benefited from the scheme.

As a result mainly of economic factors including low property prices and a decline in interest rates, a significant overlap has emerged between the target group of HOS flats and that of the private sector residential market. In September 2001, the Government announced a moratorium on the sales of all subsidised home ownership flats until the end of June 2002. Sales of these flats after the moratorium will not exceed 9 000 units a year up to 2005-06. In line with this decision, 12 000 additional loans were made available by the HKHA to replace an equal number of flats originally planned for sale over the period. During the period of the moratorium, the Government and the HKHA will address three longer-term issues, namely, the ratio between home ownership flats and loans, the eligibility criteria for subsidised home ownership, and the system for allocating sites for subsidised flats for sale. In line with the Government's moratorium, the HKHS also suspended the sale of unsold Sandwich Class Housing Flats.