MU Connect issue 3 (page 31)

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Divergence of subsidised and private home prices under COVID-19

In late 2020, the Public and Social Policy Research Centre under the School of Arts and Social Sciences formulated an index, now known as the HKMU HOS Price Index, to trace the price trends of Home Ownership Scheme (HOS) homes in the secondary market. The initial computation involving data from January 2013 to June 2020 showed HOS home prices hiking up more rapidly than their private counterparts. However, the index has fallen since then as impacts of the pandemic kicked in.

Analysing the index for the period of January 2020 to May 2022, the research team records a 10% slippage in HOS home prices, compared with a 0.5%-to-2.7% growth in the private market.

The team ascribes the divergence to three factors.

The previous strong growth of HOS homes has essentially reduced their market discount, rendering the relatively less liquid subsidised property type less appealing in a slowing market.

White Form and Green Form holders are drawn towards an increased supply of new HOS flats, which are also traded at an increased discount.

Low-to-middle-income households, which constitute the main body of potential HOS home buyers, may have come from the hardest-hit sectors under the pandemic, such as construction, retail and manufacturing.

The team sees the price adjustments as a sign of the market mechanism at work and advises against excessive regulations of the HOS secondary market. 'On the other hand, we believe that providing HOS buyers with more mortgage options will invigorate the market in the long run,' adds Dean Prof. Charles Kwong Che-leung, who heads the research team.