2025-02-21 28Hse Editor
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- Suspected Speculation: 'unmodified' Hos Flat Owner To Surrender Resale Profits, Homeowners Rejoice Too Soon
Property prices in Hong Kong remain high, and even subsidised housing has turned into a speculative investment tool, leading to controversy. The Housing Authority (HA) recently managed a case involving the resale of a Home Ownership Scheme (HOS) flat, resulting in the owner being required to surrender all profits from the sale to the HA.
Located in Hoi Lok Court, Cheung Sha Wan, the reported flat is an ‘unmodified’, 629-square-foot, three-bedroom, high-rise unit. The original owner bought the flat in 2019 for HK$4.4 million, at HK$7,040 per square foot.
In 2019, the unit was sold for HK$8.38 million, premium unpaid, making it the highest-priced transaction of record for the housing estate. The owner made a profit of nearly HK$4 million after holding the unit for four years. However, it was later revealed by the media that speculation was involved. The flat was sold without modifications, as the owner may never have moved in and merely purchased the flat for speculative purposes. The Housing Authority eventually recovered all profits from the resale.
To date, the HA has not confirmed if the flat in question is the aforementioned one, and has indicated that it is not the only case under scrutiny. Several other similar instances are still under investigation. This incident has garnered significant attention in the market. Opinions are divided; some believe that measures should be implemented to deter speculation, while others argue that owners should not face overly harsh penalties.
Why is the HA entitled to reclaim the relevant profits? The Sales and Purchase Agreement for HOS flats, signed by the owners, stipulates that the subsidised flats should be occupied by the owners and all family members listed in the application. The aforementioned owners breached this requirement, as they never moved into the property.
If the owner is found to have violated the requirement, the HA will deny the application for a Certificate of Availability for Sale (CAS) or Letter of Nomination (LN). Any previously issued CAS will also be revoked, preventing the owner from selling the flat on the HOS Secondary Market.
Nevertheless, the law shows leniency under special circumstances. If the owner cannot occupy the flat due to exceptional situations, such as hospitalization due to illness or needing to care for a family member with serious health issues, the HA may suspend the enforcement of actions for breaching the Sale and Purchase Agreement. Otherwise, the HA reserves the right to request that the owner transfer the flat back to the authority.
In this scenario, the owner must surrender all profits to the HA and can only recoup the original purchase cost. Additionally, the owner must absorb losses from stamp duty, solicitor's fees, management fees, agent's commission, and other miscellaneous expenses.
The Home Ownership Scheme (HOS) was originally intended to help public rental housing tenants ascend the property ladder, offering HOS flats at below-market prices. It also aimed to provide an affordable home-buying option for those with insufficient income for private flats. However, the scheme has devolved into a vehicle for speculation, and the government must intensify its measures to ensure the policy aids those truly in need.
To curb speculation, a restriction period on the transfer of subsidized housing has been enacted. From 2022, the moratorium on sales will be extended. Owners wishing to sell their flats on the free market after paying the premium must have owned them for 15 years. For sales on the secondary market, a five-year ownership period is required, up from the initial two years.
The no-sale period has been effective for many years, somewhat deterring speculation, but it has not completely prevented misuse of HOS flats. The HA might consider conducting inspections to verify the habitability of flats when processing applications for the Certificate of Availability for Sale or Letter of Nomination.
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