The government will place into the secondary housing market next year 5,000 residential flats, for which land premiums have not yet been paid under the Home Ownership Scheme (HOS). The decision is the government's latest move to alleviate the housing shortage and comes despite the fact that a Legislative Council (LegCo) panel has passed a motion to shelve the plan.

As planned, the first phase, amounting to 2,500 units, will go on the market in January. The second phase will follow six months later.

This is an interim measure in advance of new HOS flats scheduled to come on the market in 2016-17. Existing non-public housing tenants or prospective tenants (i.e. white form applicants) who fulfill the income/assets limits are eligible. The government said the number of flats to be placed on the market is appropriate. There has been no estimate as to how many white form applicants will purchase the flats but the government admitted the number of transactions of second-hand HOS flats has been low over the years.

At the LegCo Panel on Housing meeting on Monday, lawmakers from across the board asked whether the scheme could help green form applicants, (i.e. existing public rental housing tenants) to buy properties, knowing that the price of second-hand HOS flats has risen sharply beyond their affordability, since Chief Executive CY Leung announced the scheme in July.

Lawmaker Leung Chi-cheung of the Democratic Alliance for the Betterment and Progress of Hong Kong said speculative market activities have pushed up prices of second-hand HOS flats. The price of such a flat on Hong Kong Island has risen to over HK$3 million with the land premium to be added, while one in Tin Shui Wai new town is close to HK$3 million, he noted.

Labour Party lawmaker Fernando Cheung added that the scheme could not help public housing tenants to move upward, because the actual housing supply has not increased and the scheme will simply yield 5,000 additional buyers.

To solve the problem, several lawmakers, including People Power's Raymond Wong and real estate constituency representative Abraham Shek, urged the government to increase production of public rental units to ease the long waiting queue.

Several lawmakers also pointed out that the small number of second-hand HOS transactions shows that very few owners are willing to sell, because most flats are for genuine self-use for life.

In response, Secretary for Transport and Housing Anthony Cheung said the average number of second-hand HOS flat transactions was less than 2,000 over the past 10 years. The target of 5,000 flats is appropriate, he said, compared with 250,000 HOS flats for which the land premium is not paid. He said the government will evaluate the effectiveness of the scheme once it is underway. It would be irresponsible for the government to drop the scheme before its effectiveness is evaluated, he contended.

As to price increases in the secondary HOS market, Cheung said the increase was associated with several reasons but not a single one. In the end, the panel passed a motion to ask the government to shelve the review plan. But the motion is not legally-binding on the government.

joseph@chinadailyhk.com

(HK Edition 11/06/2012 page1)