17 November 2018
Four in five invited applicants didn't show up recently when asked to pick their flats in the De Novo project in Kai Tak. Photo: HKEJ
Four in five invited applicants didn't show up recently when asked to pick their flats in the De Novo project in Kai Tak. Photo: HKEJ

Why the De Novo housing units aren’t finding many takers

Hong Kong government launched the so-called Sandwich Class Housing Scheme in the 1990s. But the scheme was halted in the new millennium following a housing market crash.

Recently, the government unveiled a modified version of the program, through the De Novo housing project at Kai Tak.

However, the subsidized flats in the venture have been too expensive for most of the targeted families

De Novo is the first subsidized housing project of the Urban Renewal Authority (URA). The development was set to offer 338 subsidized flats, ranging in size from 332 to 568 square feet and priced at 80 percent of the market rate.

The project is a rare government housing project in the city’s downtown area. And it is located close to the Kai Tak subway station.

Hence, authorities came up with an average price of HK$11,000 per square feet, after taking reference from nearby private flats.

The units now mark the city’s most expensive subsidized flats.

The housing project mainly targets families rather than single individuals. Ninety percent of the flats range from 444 to 568 square feet in area. And the average cost of a unit is around HK$5.7 million.

Single people who seek to buy the flat shouldn’t have monthly household income in excess of HK$33,500 and existing assets worth more than HK$1.5 million. For family applicants, the income and asset limits are set at HK$60,000 and HK$3 million respectively.

As a result, the units are unaffordable for most of the targeted applicants. Meanwhile, the eligibility criteria have meant that some potential buyers have been shut out.

For example, buyers need to give a down-payment of HK$1.15 million for buying a 539-square-foot flat which costs HK$5.75 million, in deals involving 80 percent mortgage and tenor of 25 years. Buyers will need to pay monthly mortgage of HK$19,900 with an interest rate of 2.2 percent.

If the interest rate surges to 5.2 percent, the monthly loan payment would rise to HK$27,400. In this case, homebuyers must have a minimum monthly income of HK$46,000.

That means family applicants have to make at least HK$46,000 per month but no more than HK$60,000 to be eligible for the units. There are very few families that can meet the criteria.

It’s quite obvious that De Novo project is something that goes against the purpose of subsidized flats. The units have met with cold response as the city’s housing market has cooled off significantly since September last year.

Nevertheless, the project is not allowed to cut prices, unlike private estate developments, since De Novo is designated as subsidized housing.

The project operator released the price list in December last year, but a key property index in the city has tumbled nearly 10 percent since then.

De Novo received a total of 12,000 applications initially, which means more than 30 applicants for one flat. However, 80 percent of the invited applicants didn’t show up recently when asked to pick their flats.

This article appeared in the Hong Kong Economic Journal on April 12.

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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