Legislative Council Panel on Housing

Sandwich Class Housing Scheme


This Paper sets out the response of the Hong Kong Housing Society and the Administration to the suggestions made by some purchasers who have bought flats under the Sandwich Class Housing Scheme.


2. The Housing Society is Government's agent in implementing the Sandwich Class Housing Scheme (SCHS). Currently two projects (1,906 units) have been completed and a further eleven projects (10,160 units) are under construction. Seven of these projects were pre-sold during 1997 and early 1998 and will be completed during the remainder of this year and early 1999.

3. Some purchasers of the pre-sold projects have complained that due to the downturn of the property market in recent months, they have experienced difficulty in completing their assignments. To assist the purchasers of SCHS projects, the Housing Society has introduced the following measures -

  1. if banks provide mortgages of up to 80% of the selling price, the Housing Society will share their losses in default cases within the first five years. Specifically, during this period, the Housing Society will cover the banks' risk on the portion of loans relating to the difference between the banks' valuations of the flats and the selling prices; and

  2. the Housing Society will subsidise purchasers' mortgage costs by reimbursing purchasers the difference between prime rate and the bank's best mortgage interest rate for the first three years.

Present Position

4. Recently, some purchasers sought further assistance from the Housing Society in the form of applying flexible discount rates to the selling prices, providing full buy-back guarantee to and reduction of the Full Market Value (FMV) of flats that have been sold. The Administration and the Housing Society have considered these requests carefully and concluded that such demands cannot be acceded to.

5. The proposals to adopt a flexible discount rate system retrospectively and to reassess the FMV of SCH flats that have been sold will set an undesirable precedent whereby contractual obligations entered into can be varied because of changing market conditions and price fluctuations. This will also have serious implications on other subsidised housing schemes such as the Home Ownership Scheme (HOS) and the Private Sector Participation Scheme (PSPS) of the Housing Authority (HA). In addition, as the selling proceeds will accrue to the Housing Society entirely whilst Government will only recover the full premium when the flats are sold in future, the introduction of a choice of discount rates will reduce the Housing Society's revenue, and affect its cashflow since it has to remit part of the selling proceeds to the purchasers.

6. Although the Housing Society is providing subsidised flats for sale similar to the Housing Authority (HA), it operates quite differently from the HA as far as its financial arrangement is concerned. The provision of full buy-back guarantee by the Housing Society will have serious implications on the financial position and contingent liabilities of the Housing Society.

7. The Housing Society and the Government appreciate the difficulties faced by some purchasers. To this end, the Housing Society has agreed to assist buyers by sharing banks' losses in default cases for the first five years and providing an interest subsidy for the first three years of bank mortgages. The Housing Society has secured the support of a number of banks for these arrangements.

Usable Area

8. As regards the issue of Usable Area, since there is at present no standardised and commonly recognised definition or method of calculating Usable Area, the Housing Society will continue to provide prospective purchasers information on Saleable Area, the definition of which has been agreed upon by relevant professional institutions and the Consumer Council. The feasibility of deriving a standard definition of Usable Area is being examined by the relevant professional institutions, Consumer Council and the Government.

Housing Bureau
Government Secretariat
July 1998