Government_Subsidy_in_Hong_Kong

In order to help tackle the problem of market failure, the government provides different subsidy programmes such as the Home Ownership scheme and My Home Purchase Plan. Government Subsidy 1. The Home Ownership Scheme (HOS) HOS aims at providing the poor a chance to purchase and rent public housing from the government. The flats are sold to eligible low-income residents at prices far below the overall market, at discounts between 30 and 40 percent, and received subsidies on the land value. HOS flats are intended for both Green Form (GF) and White Form (WF) applicants. WF applicants are households whose income and asset limits are higher than those prescribed for Public Rental Housing applicants but who may still have difficulty in purchasing a private residential flat in the second hand market. GF applicants are not subject to income and asset limits under HOS. The total family income and net asset limits of WF applicants are as follows: |Household Size |Household Income Limit |Net Household Asset Limits | | |(HK$) |(HK$) | |1 Person |$11,500 |$240,000 | |2-5 Persons |$23,000 |$480,000 | |6 Persons |$23,000 |$500,000 | |7 Persons |$23,000 |$540,000 | |8 Persons |$23,000 |$560,000 | |9 Persons |$23,400 |$620,000 | |10 Persons or more |$25,000 |$680,000 | 2. My Home Purchase Plan (MHPP) The MHPP is aimed at providing flats that are more affordable than the majority of the private flats. People who find financial difficulty to buy a private flat but not eligible for public rental housing are the target group of this scheme. The government will build about 5,000 "no-frills" flats for applicants. Rent will be set at the market level and the rent will be frozen for five years. Under the MHPP scheme, the tenants may buy the flat they are renting or another flat at market price, or buy a flat in the private market, within a specified time. After renting or buying the flat for 5 years, half of the rents paid will be refunded toward the purchase of a home. Hypothetical Case (ACCORDING TO GOV. SUGGESTION): Limitations 1. Both schemes have potential risk to influence the property market price. The increase of supply in these flats may result in the decrease of supply in private residential flats. 2. Applicant of do not have a choice on the districts of the HOS flats, this may arise problems of traffic congestion and air pollution. 3. Tenants who have not purchased a flat under the MHPP or in the private market within the prescribed period will not receive any subsidy. 4. It is time consuming for completing the home mortgage repayments of MHPP because of the economic difficulty. 5. It is difficult to find the construction lands since the lands of public housing maybe affected by the MHPP. Should the government provide subsidy in the above market failures' Rise in property prices was mainly driven by the private market, cheap money tends to seek out the highest returns it can find, Hong Kong has no restrictions on foreign investments to it stock, people are piling into Hong Kong dollar-denominated assets. 6,000 billion of hot money inflows and low interest rate environment result in high property prices and the government subsidies (HOS and MHPP) therefore could not help cooling down the property market.