ACHIVABLE or NOT? - Young People’s Home Ownership Dreams

Land is precious in Hong Kong. The price of one square foot of property is higher than one-month salary of a recent university graduate. In that case, even if people get married, they may experience difficulties in establishing a family. It is believed that youngsters will feel anxious about acquiring homes. In the following, I would like to share some suggestions accordingly. 

Young people who want to acquire homes or demand for housing can be divided into three categories: persons who can afford a down-payment, persons who are still saving for a down-payment and persons who desire but can’t afford to buy a flat.

Youngsters who can afford the down-payment: Manage finances prudently and maintain a rational approach in purchasing properties

For those who can afford the down-payment is to manage finances prudently and maintain a rational approach in purchasing properties. “Manage finances prudently” means to calculate accurately. Undergoing a stress test is a must for mortgage loan applicants. The criteria of this test include income, payments and debts, and the installment of the credit card will be counted as a debt. As I know, too many installments are among the reasons why youngers fail the stress test. It is suggested that those youngsters who adopt a pre-payment mode of consumption need to have proper financial planning and reduce installments of their credit cards. Thus, this effort won’t contribute to the increase of payments and failure in the stress test.

Additionally, many youngsters pursue first-hand property because of the new decorations and luxury facilities, like a clubhouse. Although first-hand property is relatively expensive with extra spending, the young always hope for a better living environment. In fact, this mindset has brought greater stress to them. For those who possess sufficient down-payment but unable to buy luxury flats, it is recommended that the young consider buying second-hand small flats. You may rent the property to others while you rent another place first, then taking a "flat-for-flat" option when appropriate, serving as a hedge. Please be reminded that we should always consider the geographical advantage of the flat before purchasing, such as transport facilities, the age and decoration of the flat.

If you are still saving for a down-payment, let’s take a look at the residential projects specially created for first-time homebuyers. In the past, a property developer has launched the “Starter Homes” scheme for first-time homebuyers aged between 25 to 35, which they can spend as low as 7.5% for a down-payment, with the longest payment period for 40 years. While the higher interest rate has increased the cost of property purchase, it has also benefited the young who lack sufficient funds for a down-payment. Plus, as part of the “Starter Homes" Pilot Scheme, The Urban Renewal Authority has implemented 450 units of “eResidence,” the housing project in To Kwa Wan. More related projects and units are to be launched, so those who are saving for down-payment can take note.

Government policies help relieve housing demand among young adults

For those who want a place to live and have no plans to buy their own homes, they can consider renting the flat under the “Young Adults Hostel Scheme” targeting working young adults aged between 18 to 30. The rental fee will be as low as 50-60% of the market value, with a tenancy period for at least two years while the contract renewal cannot exceed five years. While the tenancy period is short, it can buffer the great housing demand. Besides, these young people should note that tenants need to give up public housing applications during the tenancy period.

The government estimates that the HKFYG Tai Po Youth Hostel will be completed in the third quarter of this year and become the first completed project under the scheme, providing around 80 hostel places. Besides, building work at the Ma Tin Pok project, also under the “Young Hostel Scheme” which commenced in 2015, has started in March this year. The government expects the project will be completed in the third quarter of 2021.

In the future, the government should increase the land supply in order to solve the problem of housing shortage in the long run. For example, under the “Lantau Tomorrow Vision,” around 1,000 hectares of land will be newly created on the Kau Yi Chau Artificial Islands. Hence, the government can build 150 000 to 260 000 housing units, of which 70% will be for public housing. As it for land reclamation takes time, the government can adopt a multi-pronged strategy to enhance the land supply, such as seeking brownfield areas and rezoning, in a bid to meet the urgent needs. The younger generation would certainly feel more comfortable, if the government could offer a steady supply of housing.

Take reference to overseas examples: solving problems through private-public collaboration projects

Apart from Hong Kong, New York is also another city with high housing costs. Property developers there have collaborated with the government to allocate 20% of housing units for “affordable housing” [1] in order to provide another buying option for low-income applicants. Besides, the government there has provided the reduction of profits tax for developers. In other words, the reduction is like a kind of subsidy for helping youngsters to buy properties. As circumstances differ, Hong Kong may not necessarily duplicate the same measure. It is believed there is ample scope for discussion of private-public collaboration in a situation in which the home buyer can have the subsidy from the government while the developers won’t necessarily sustain a loss.

[1]<Affordable Housing>, https://www1.nyc.gov/nyc-resources/service/1021/affordable-housing

Ho Chun Wai

General Manager, Chun Wo Property Development