Hong Kong people still remember the property market collapse amid an abortive plan by then Chief Executive Tung Chee-hwa to build 85,000 public housing units.
That began in 1998, shortly after Tung became Hong Kong’s first post-colonial leader.
Now, Tung’s Our Hong Kong Foundation think tank is proposing an idea that might have an even more far-reaching impact.
It’s called Subsidized Homeownership Scheme to boost home ownership rates to 80 percent of Hong Kong households
Under the scheme, public rental housing tenants will be allowed to buy the flats they live in at 20 percent less than the market price.
Also, they can enjoy a 95 percent mortgage.
Their repayment will be fixed at 80 percent of the market price in the year they moved in, regardless of subsequent price changes.
For example, if a family moves in this year and their flat is currently worth HK$3 million, they can buy it for just HK$2.4 million at any given time in the future.
That can be, say, 20 years later even if property prices have doubled or tripled by then.
If property prices fall during that period, the actual amount the same family needs to pay will be reduced according to the market value of the property at the time of the sale.
Let’s say if the flat is only worth HK$2 million in 2035, it could be bought for HK$1.6 million instead of HK$2.4 million.
In other words, if property prices go up, public rental housing tenants need not worry because the amount they have to pay for their flats is capped at the original level.
But if market prices go down, they pay less, so either way, they win.
As we all know, the public rental housing policy is a legacy of the colonial administration.
It goes back to the 1970s during the government of Governor Murray MacLehose.
The policy has been instrumental in bringing economic prosperity and social stability, without which tens of thousands of people could have been left homeless.
Tung’s proposal can be viewed as an improved version of the Tenants Purchase Scheme launched by the Housing Authority in the 1990s but which was scrapped in the 2000s amid a property market crash.
The government of Leung Chun-ying has yet to respond to the proposal.
Only time will tell how it will affect society if it’s implemented.
One possible downside is that young people may lose the drive to succeed in the workplace when a low-paying job qualifies them for these socialized housing benefits.
For them, owning a home never looked so easy.
The potential impact on the private property market is another matter.
This article appeared in the Hong Kong Economic Journal on Nov. 12.
Translation by Alan Lee with additional reporting
[Chinese version 中文版]
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