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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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