Hong Kong Chief Executive Carrie Lam will deliver her maiden policy address next month. The public has high expectations for her plan to tackle the city’s longstanding housing issue.
It’s reported that Lam might unveil a new scheme to help local first-time homebuyers who do not qualify for subsidized flats but can’t afford private housing in the current market.
In the meantime, China has launched a new “joint-property ownership” scheme to help low-income families buy their first homes.
The scheme will take reference from market prices, and individuals are allowed to buy a minimum of 30 percent stake of a unit.
For example, if a 500-square-foot apartment in Beijing is sold at 4 million yuan, a jointly owned one will probably come at around a 20 percent discount given their relatively basic design and facilities.
So at 80 percent of 4 million, or 3.2 million yuan, a qualified buyer can opt to purchase a 30 percent ownership for 960,000 yuan.
They only need to pay a down payment of about 100,000 yuan and make a monthly mortgage payment of around 3,000 yuan. This way will give them the chance to get on the property ladder.
Individual investors will be allowed to lease or sell the property five years later, and they will earn a rental or resell revenue by proportion. For example, if the property is leased for 5,000 yuan per month, they will get 1,500 yuan per month, while the government will get the rest.
Also, individuals can apply to the government for increasing their ownership after living for five years. More importantly, buyers of these jointly owned homes can always sell the home back to the government at original price they paid. So basically, buyers are shielded from market downturns due to problems like an economic crisis.
The joint-property ownership seems ideal for first-home buyers. But the catch is there won’t be many of them. Big cities in China are also facing a short supply of land, just as we’ve seen in Hong Kong.
For example, the capital city Beijing has a massive population of more than 22 million. There may only be enough land for several thousand jointly owned flats each year.
In the end, successful applicants will probably be decided by lottery and only a fraction of people would benefit.
No matter what the details of Carrie Lam’s plan would be, whether the housing shortage issue can be resolved ultimately rests upon the government’s ability to increase land supply.
A new committee has been set up for the mission and it will meet for the first time Thursday. Let’s see if it can review and evaluate all land supply options and come up with feasible solutions.
This article appeared in the Hong Kong Economic Journal on Sep 6
Translation by Julie Zhu
[Chinese version 中文版]
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