Generally speaking, a high property valuation favours those who wish to acquire a property whereas a low one favours Home Ownership Scheme (HOS) flat owners who are seeking to pay the premium for selling the flat in the future. Nonetheless, not all HOS flat owners know the procedure for premium payment and the calculating formular behind the premium.
If owners wish to sell their HOS flats, it has to be done after the 5-year alienation restriction period of their property has expired. Otherwise, the owners have to submit a buyback offer to the Housing Authority (HA) and can only sell the HOS flat in the open market after having received the rejection of the buyback offer and paid the premium. For owners of HOS flats with an expired alienation restriction period, they can directly apply for premium payment by submitting a completed Application Form for Assessment of Premium (Application Form) together with an administrative fee of HK$6,230 that is paid either by cheque or through bank transaction.
In addition, HOS flat owners can also sell their property in the HOS Secondary Market to eligible persons in possession of the Certificate of Eligibility for Purchase issued by the HA at a freely negotiated price without the need to pay a premium.
The Formula for the Premium
The premium is calibrated based on the property’s prevailing market value assessed by the HA as well as the discount that the HOS flat owner enjoyed when he first purchased the flat. This figure can be found on the online Land Search website and in the title deed.
Premium = Prevailing Market Value x Discount Enjoyed when Purchasing the HOS Flat
For example :
Prevailing Market Value = HK$5,000,000
Purchase Price = HK$2,000,000
Initial Market Value at the Time of Purchase = HK$3,000,000
Premium = HK$5,000,000 × (HK$3,000,000- HK$2,000,000) / HK$3,000,000
= HK$5,000,000 x 0.33
The assessed premium is valid for 2 months only and will lost its validity if the premium is not paid on time. Owners who fail to pay the premium within the validity period will be required to submit another Application Form and administrative fee if they wish to apply for premium assessment again in the future.
If the Assessed Prevailing Market Value is Too High, Owners Can Lodge an Appeal
Upon the receipt of the Application Form, HA will send a representative to the relevant HOS flat for inspection and property market value assessment. If the owner disagrees with the assessed property market value, he must lodge an opposition in writing to the Support Services Section (4) of Housing Department (HD) or its appointed surveyor within 28 days from the date of the Notice of Premium Assessment. As an alternative, the owner can also lodge an appeal to the Lands Tribunal within 28 days from the date of the Notice of Premium Assessment. It is crucial that HOS flat owners be cautious about the date as late objections will not be entertained.
There were cases in the past when an HOS owner lodged an appeal to the Lands Tribunal as he thought the prevailing market value assessed by the HD was unreasonably high. At the end he won the case and received a refund for the extra premium paid.
Apply for Premium Payment when Property Prices are on the Low End
As mentioned above, the premium is calibrated based on one variable, the prevailing market value, and one invariable, the discount the owner enjoyed when purchasing the HOS flat. In this case, HOS flat owners can submit the Application Form in advance when the property market is gloomy so that they can pay a lower premium and then make a greater profit when selling the flat in the future.