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					                                                                                    PAPER NO.   SHC 31/2010




             Memorandum for the Subsidised Housing Committee of
                     the Hong Kong Housing Authority

                The Sale of Surplus Home Ownership Scheme Flats
                                  under Phase 6


PURPOSE

             This paper is to inform Members and seek their approval of matters
relating to the sale of surplus Home Ownership Scheme (HOS) flats under
Phase 6.


BACKGROUND

2.             On 26 March 2010, Members approved vide Paper No.
SHC 20/2010 that around 4 000 flats (comprising about 300 left over flats from
the special sales exercise Note 1 and the remaining stock of some 3 700 flats Note 2 )
be put up for sale under Phase 6 in June 2010. Since the special sales exercise
is still in progress and the number of flats left over for inclusion into Phase 6 is
not finalized, all the 398 flats under the special sales exercise are included in
this submission and a full list of flats is set out in Annex 1.


UNDERLYING PRICING PRINCIPLE

3.           Vide Paper No. SHC 6/2006, Members approved among other
things the pricing guiding principles for setting the prices of surplus HOS flats.
The sale price of HOS flats is set with reference to affordability of eligibility
buyers as measured by their mortgage repayment ability.




Note 1 :   The special sales exercise is being implemented for the Qualified Households affected by the Hong
           Kong Section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link. We have set aside 398
           surplus HOS flats in 5 courts in the New Territories for selection by the Qualified Households. We
           estimate that there will be around 300 plus flats not taken up in the special sale exercise, to be
           included in Phase 6.

Note 2 :   We will keep in view the progress of negotiations to resolve the management dispute raised by
           existing owners in Tin Chung Court and determine whether to proceed with the sale of about 800
           flats in this development as scheduled.
                                              -   2   -


4.           In working out the average selling prices of flats in different HOS
courts for sale in Phase 6, we have followed the general guideline to offer a
discount of 30% to the assessed market value of individual HOS courts. We
then reviewed the overall pricing of all the flats offered for sale in Phase 6 to
ensure that at least 50% of the flats are priced at a level which is affordable, as
measured by a mortgage-to-income ratio of not more than 40%, to applicants
with household incomes at the HOS Income Limit Note 3 . We shall consider
increasing the discount rate if the overall affordability is below 50%.

5.           In assessing the market values of flats in HOS courts for sale, we
have considered the sales transactions of properties in various comparable
developments in the vicinity of the HOS courts, primarily in February to April
2010. Where available, the prices of flats in relevant HOS courts sold in the
open market have also been referenced. In arriving at the assessed market
values, due regard has been given to the fact that the surplus HOS flats have
been completed for some time. For those returned flats that have been
occupied before, our valuation is based on the assumption that the flats are in a
generally habitable and sanitary condition with no particular adjustment to
reflect the difference in the condition of the internal decoration of individual
flats.


FLAT PRICES ASSESSMENT

6.           By applying a price discount of 30% to the assessed market values
as mentioned in paragraph 5 above, the average selling prices are calculated and
set out in Annex 2. The proposed selling prices for the flats will range from
the lowest of $302,400 in Lung Hin Court of Tai O, Lantau Island to the highest
of $3,284,500 in Tung Tao Court of Hong Kong East.

7.           The overall affordability in respect of the flats for sale in Phase 6 at
a price discount of 30% is worked out at 99%, which satisfies the required
minimum of 50%. We therefore propose that the discounted average selling
prices as shown in Annex 2 be adopted. Upon Members’ approval, we will
then fix the selling prices for individual flats based on the established indexing
system in accordance with the authority delegated to the Chief Estate Surveyor
in charge of the flat sales vide Paper No. HOC 11/89.




Note 3 :   HOS Income Limit for White Form applicants applicable to the sale of surplus HOS flats is
           proposed at $27,000/month vide Paper No. SHC 30/2010 for Members’ approval.
                                                    -   3   -


QUOTA ALLOCATION & FLAT SELECTION

8.           Members approved vide Paper No. SHC 6/2006 that in the sale of
surplus HOS flats, the quota allocation between Green Form (GF) and White
Form (WF) applicants should be at a ratio of 80:20 and that in the event of there
being any remaining GF quota upon the exhaustion of all GF applicants, it will
be allocated to WF applicants, and vice versa. The emphasis then was on the
need to boost the mobility of public rental housing (PRH) tenants and hence
enable the re-allocation of the recovered PRH flats to those in need.

9.           Recently, there have been public views that a higher WF quota
should be set to facilitate flat purchases by WF applicants. Based on the sales
records for Phases 1 to 5 Note 4 , GF applicants have never used up the 80% quota
and the remaining unused quota has been allocated to WF applicants. Taking
in account both the overall ratio split of 50:50 for the past 5 phases and the
GF:WF take-up rate of 70:30 in Phase 5, we consider that a GF:WF ratio split of
60:40 will achieve a balance between meeting the respective needs of GF and
WF applicants, and having regard to the policy objective of encouraging GF
applicants to buy HOS flats in order to enhance the turnover rate of PRH flats.
We also propose to maintain the flexibility to switch the unused GF quota to
WF applicants, and vice versa.

10.           The priority for flat selection between ordinary GF and WF
applicants will follow the revised ratio to become 3:2 instead of 4:1. But we
shall maintain the order of priority for flat selection by category of
applicants Note 5 with family households being allowed to select flats before
one-person households.

Note 4 : Number of flats sold to GF and WF applicants under Phases 1 to 5 Sale of Surplus HOS Flats
    Number of Flats sold      Phase 1      Phase 2       Phase 3        Phase 4       Phase 5        Total
    GF applicants           1 591 (44%) 1 837 (56%) 2 034 (56%) 530 (28%) 1 002 (72%) 6 994 (51%)
    WF applicants           2 037 (56%) 1 434 (44%) 1 599 (44%) 1 389 (72%) 392 (28%) 6 851 (49%)
    Total                       3 628       3 271         3 633          1 919         1 394        13 845

Note 5 : In respect of the GF queue, flat selection priority will be allotted in the order of families affected by
         Housing Authority (HA)’s clearance programmes, families applying under the Priority Scheme for
         Families with Elderly Members, other families, one-person households affected by HA’s clearance
         programmes and other one-person households. Regarding the WF queue, nuclear families applying
         under the Priority Scheme for Families with Elderly Members will come first, and followed by other
         nuclear families, non-nuclear families and one-person households.

          As approved vide Paper No. SHC 33/2007, if GF applicants who obtained a public rental housing
          (PRH) unit through the Express Flat Allocation Scheme launched from 2007/08 onwards apply for the
          purchase of surplus HOS flats within 3 years from intake of their PRH unit, they will be treated as if
          they were WF applicants in the flat selection order, and any surplus HOS flats taken up by this
          category of GF applicants will be counted against the WF quota. Upon purchase of an HOS flat, this
          category of GF applicants, similar to other GF applicants, will have to surrender their PRH units to the
          HA.
                                     -   4   -


APPLICATION FEES

11.           Application fees are generally set to recover our costs and they are
reviewed annually. The last review of application fees conducted in October
2009 is still applicable. We will adopt the existing charging basis in Phase 6
with an initial application fee of $100 to be charged on application and a top-up
fee of $185 to be charged at the time of flat selection for successful applicants.


APPLICATION AND SALES ACTIVITIES

12.           We intend to invite applications for purchase of the surplus HOS
flats under Phase 6 in June 2010. Selection of flats by successful applicants is
scheduled to start from August 2010. Details about the application and sale
activities are set out in Annex 3.

13.            For unsold flats, show flats displaying a general standard/condition
of the flat at handover will be provided in Yau Chui Court, Tin Chung Court and
Kam Fung Court for viewing during application and flat selection periods. In
addition, one show flat in each of these three courts will be furnished to allow
prospective purchasers to feel how the space may be utilized.

14.        Returned flats are within occupied blocks and are sold on an “as is”
basis. We shall take a customer-focused approach to the flat viewing
arrangements to enhance the marketability of these returned flats and the
arrangements will be conducted mainly in two stages as follows -

      (a)    Application Stage

             Apart from the provision of pamphlets on general sales
             information, we will produce some photos showing the internal
             conditions of the returned flats and upload them onto the Housing
             Authority (HA) web site for reference by prospective purchasers.
             In addition, photo albums will be available for viewing in the
             exhibition gallery of Lok Fu Customer Service Centre. The
             photos will also be put on a free-of-charge DVD to be mailed to
             eligible applicants before their turn for flat selection.
                                     -   5   -


      (b)    Flat Selection Stage

             We will arrange for applicants to view the particular returned flat
             they have selected to buy before the signing of the agreement for
             sale and purchase (i.e. the “pre-ASP viewing”).

15.           For all unsold new flats, we will carry out pre-sale defects
rectification and maintenance works to bring them up to a reasonable standard
before handover to purchasers, and as previously decided by Members, we will
provide a defects liability period of one year from the date of assignment of
individual flats. As for the returned flats, general checking of building and
services installations and cleansing work will be carried out before handover to
purchasers but no defects liability period will be provided as these flats are sold
on an “as is” basis.


FINANCIAL, STAFFING AND IT IMPLICATIONS

16.          The estimated total sales proceeds for Phase 6 sale of surplus HOS
flats is $5,875.9 million while the operating surplus is estimated at about
$2,026.1 million after the costs are deducted.

17.         Additional workload in implementing the flat viewing
arrangements for returned flats will be absorbed by existing staff. We do not
expect any major IT implications arising from the sales exercise.


PUBLIC REACTION AND PUBLICITY

18.         The sales arrangements and flat pricing are expected to arouse
widespread interest from the general public, market players, politicians and the
media. A press statement will be issued after the SHC meeting.
                                    -     6   -


DISCUSSION

19.          At the meeting to be held on 17 May 2010, Members will be
requested to note the above detailed arrangements and to approve –

      (a)   the discounted average selling prices as shown in Annex 2
            (paragraph 7); and

      (b)   the quota allocation split ratio between GF and WF applicants of
            60:40 with the flexibility to switch the unused GF quota to WF
            applicants, and vice versa, and the priority for flat selection as
            between ordinary GF and WF applicants at 3:2 (paragraphs 9 and
            10).


                                            Ms Cindy CHAN
                                Secretary, Subsidised Housing Committee
                                           Tel. No.: 2761 5033
                                           Fax No.: 2761 0019


File Ref.       :   HD(CR) 20/171
                    HD(S)HR 2/25/1/4
                    (Strategy Division)
Date of Issue   :   11 May 2010
                                                                       Annex 1


                Tentative List of Remaining Surplus HOS Flats
               (including Flats under the Special Sales Exercise)



      District                          Estate                      Number of Flats

Yau Tong               Yau Chui Court                                     1 111

                       Aldrich Garden, Tung Tao Court,
Hong Kong East &
                       Broadview Court, Hung Fuk Court,                    178
Hong Kong South
                       Lung Tak Court, Ocean Court


                       Choi Fung Court, Fung Lai Court,
                       Grand View Garden, Ka Keung Court,
Wong Tai Sin           King Hin Court, Rhythm Garden,                      422
                       Tak Keung Court, Tsz Oi Court,
                       Tsz On Court, Ying Fuk Court

Kwai Tsing             Ching Wang Court, Lai Yan Court                      12

                       Beverly Garden, Choi Ming Court,
Tseung Kwan O                                                              271
                       Fu Ning Garden, Tong Ming Court

Ma On Shan             Kam Fung Court, Kam Tai Court                       641

Tin Shui Wai           Tin Chung Court, Tin Fu Court                      1 294

                       Cheong Shing Court, Ka Shing Court,
Fanling                                                                    116
                       Wing Fai Centre, Yung Shing Court

                       Lung Hin Court, Peng Lai Court,
Islands                                                                     34
                       Yu Tung Court

                       Total :                                            4 079
                                                                                                                Annex 2
                                                                                                                 (P.1 of 2)

                                          Proposed Average Selling Prices of
                                       Surplus HOS Flats for Sale under Phase 6
                                                                                     Proposed Average
                                                    Block     No. of    Saleable      Selling Prices @            Proposed
  District                    Estate                Type#     Flats      Area          30% Discount             Selling Prices
                                                                           m2         $/m2       ($/ft2              $/flat
                                                                                     Saleable Gross Floor
                                                                                      Area       Area)
(A) New Flats in Unsold New Blocks
               Yau Chui Court (II) 油翠苑(二)
Yau Tong                                             NCB      1,110    37.2 – 59.4    37,100    (2,600)     1,007,200 – 2,514,700
               Block B, C, D
               Tin Chung Court         天頌苑
Tin Shui Wai                                        Concord    640     47.0 – 60.4    17,600    (1,250)       653,800 – 1,152,600
               Block K, L
(B) Scattered Unsold / Rescinded / Returned Flats
               Aldrich Garden          愛蝶灣           PSPS        1        55.0        46,710    (3,710)           2,569,100
Hong Kong
East                                                NCB &
               Tung Tao Court          東濤苑                       3     51.5 – 61.9    51,560    (3,450)     2,567,500 – 3,284,500
                                                    Concord
               Broadview Court         雅濤閣           PSPS      133     39.2 – 54.9    43,700    (3,370)     1,486,400 – 2,736,000

Hong Kong
               Hung Fuk Court          鴻福苑           NCB         1        51.9        38,790    (2,900)           2,013,200
South          Ocean Court             逸港居           PSPS        3     40.0 – 55.0    40,220    (3,070)     1,601,700 – 2,230,800

               Lung Tak Court          龍德苑            HR        37     19.9 – 49.0    39,460    (2,770)       583,700 – 2,046,200

               Choi Fung Court         彩峰苑      Harmony          2     40.2 – 60.0    28,330    (1,950)     1,088,500 – 1,750,700

               Fung Lai Court          鳳禮苑           NCB         8     37.8 – 51.9    35,120    (2,600)     1,326,300 – 1,819,800

               Grandview Garden 宏景花園                 PSPS        1        39.4        35,240    (2,790)           1,388,500

               Ka Keung Court          嘉強苑           NCB         1        37.8        39,640    (2,990)           1,498,400

               King Hin Court          瓊軒苑           NCB         1        59.6        30,610    (2,240)           1,824,400
Wong Tai Sin
               Rhythm Garden           采頤花園          PSPS      146     40.0 – 54.9    41,930    (3,320)     1,398,600 – 2,739,100

               Tak Keung Court         德強苑           NCB         2        37.5        43,940    (3,260)     1,627,700 – 1,668,200
                                                    NCB &
               Tsz Oi Court            慈愛苑                     257     37.3 – 60.4    37,410    (2,650)     1,054,900 – 2,655,100
                                                    Concord
               Tsz On Court            慈安苑      Harmony          3     39.0 – 49.1    31,300    (2,040)     1,135,700 – 1,606,900

               Ying Fuk Court          盈福苑           NCB         1        51.9        32,970    (2,460)           1,711,200

Yau Tong       Yau Chui Court (I)      油翠苑(一)        NCB         1        51.4        35,860    (2,510)           1,843,500

               Beverly Garden          富康花園          PSPS        1        40.0        30,450    (2,420)           1,218,200

Tseung         Choi Ming Court         彩明苑          Concord    227     47.0 – 60.4    32,300    (2,300)     1,194,100 – 2,154,700
Kwan O         Fu Ning Garden          富寧花園          PSPS        1        55.0        25,790    (2,150)           1,418,700

               Tong Ming Court         唐明苑      Harmony         42     39.6 – 60.0    28,250    (1,960)       984,800 – 1,743,700
                                                                                                                         Annex 2
                                                                                                                         (P.2 of 2)

                                                                                         Proposed Average
                                                    Block       No. of     Saleable       Selling Prices @           Proposed
  District                    Estate                Type#       Flats       Area           30% Discount            Selling Prices
                                                                              m2         $/m2       ($/ft2              $/flat
                                                                                        Saleable Gross Floor
                                                                                         Area       Area)
               Ching Wang Court        青宏苑         Concord        10     47.0 – 60.4     35,170      (2,400)   1,456,200 – 2,375,800
Kwai Tsing
               Lai Yan Court           荔欣苑         Harmony          2    55.8 – 59.1     38,910      (2,710)   2,100,100 – 2,371,000

               Kam Fung Court          錦豐苑         Harmony       640     39.2 – 60.1     32,870      (2,230)   1,020,900 – 1,973,200
Ma On Shan
               Kam Tai Court           錦泰苑         Concord          1        60.4        29,670      (2,160)            1,792,200

               Cheong Shing Court 昌盛苑              Concord        65     47.0 – 60.4     25,390      (1,820)     951,500 – 1,692,000

               Ka Shing Court          嘉盛苑         Harmony          2    40.4 – 50.7     22,000      (1,490)     908,800 – 1,095,400
Fanling
               Wing Fai Centre         榮輝中心          PSPS           3        38.9        23,130      (1,790)     865,400 –     923,200

               Yung Shing Court        雍盛苑         Harmony        46     19.1 – 59.9     22,650      (1,560)     421,600 – 1,355,900

               Tin Chung Court         天頌苑         Concord       363     39.6 – 60.4     16,850      (1,190)     570,300 – 1,120,800
Tin Shui Wai
               Tin Fu Court            天富苑         Concord       291     47.0 – 60.4     16,970      (1,210)     685,700 – 1,124,400

               Lung Hin Court          龍軒苑            NS          15     34.8 – 54.8      9,060      (620)       302,400 –     487,900

Islands        Peng Lai Court          坪麗苑            HR            5    39.1 – 59.6     12,870      (830)       479,100 –     787,400

               Yu Tung Court           裕東苑         Harmony        14     39.6 – 60.0     24,380      (1,690)     947,400 – 1,503,400

  TOTAL                                                         4,079



 #    NCB : New Cruciform Block ; PSPS : Private Sector Participation Scheme ; HR : Harmony Rural ; NS : Non-standard
                                                                                        Annex 3



                           Application and Sales Activities
                        for Sale of Surplus HOS Flats Phase 6



                        Activity                                           Period

Announcement of Sale Note 1                                                6/2010

Invitation of Applications
                                                                           6/2010
(2 weeks)

Opening of Show Flats in Yau Chui Court,
                                                                       6 – 7/2010
Kam Fung Court and Tin Chung Court; and
                                                               (during application period)
Designated Returned Flats in Tsz Oi Court

Balloting of Applications                                                  7/2010

Flat Selection Note 2
                                                                     8/2010 – 11/2010
(10 to 12 weeks)



Note :   (1) Mass publicity will be launched to announce detailed arrangements for the sale of
             surplus HOS flats Phase 6 in June 2010.

         (2) Show flats in Yau Chui Court, Kam Fung Court and Tin Chung Court will be open for
             viewing during flat selection period. The actual length of flat selection period would
             depend on the number of applications received and the success rate of flat selection.

				
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