The impacts of resale restrictions of subsidized sale flats on the property market in Hong Kong

Abstract

The Hong Kong SAR government has provided subsidized sale flats (SSFs), such as the Home Ownership Scheme (HOS), at discounted prices for eligible households. That said, speculative SSF transactions uncovered since the 2010s have led to the implementation of different stages of tightened policy on alienation periods in the past decade. The latest policy has set five-year and fifteen-year alienations for the public secondary market (SMS) and open market SSF resale respectively. The main objectives of this study are to investigate the factors and impacts of imposing stricter SSF resale restrictions, followed by exploring the possibility of segmenting the public and private markets. This study exploits a comprehensive research approach through data triangulation comprised of statistical analysis, questionnaires distributed to SSF concern groups, and in-person interviews with a Housing Authority (HA) member, a district councillor, a real estate consultancy managing-director, a senior professional and an academic scholar. The first stage studies the factors and impacts of SSF resale restrictions. Regression analysis results show that SSF estates with stricter five-year restrictions caused 3.3% reductions in short-term turnover rates and negatively influenced the price trends of SMS, as explained by sentimental effects. The next stage focuses on current policies and their future implications. Interviewees agreed speculations could be alleviated by imposing stricter restrictions, while the root still lies in housing shortage. Segmenting the private and public property markets could cool down the SMS market of SSF, as illustrated by the Granger test. However, interviewees and questionnaire respondents shared diverse views on further extending the alienation restrictions. Opposing views conveyed the essentiality of property value appreciation which serves as an imperative stepping stone for lower-income groups to enter the private property market and facilitate SSF circulations, while supporting views emphasized the entry affordability for lower-income groups. The findings also demonstrated that alienations on the SMS resale can be slightly extended to about seven years. As for the restrictions on open market resale, extension of alienation is not recommended, unless comprehensive public consultations have been carried out and alternative financing mechanisms for HA have been proposed.