Investors disappointed with murky 'Starter Homes' programme

The government wants to offer 1,000 starter-home units through a private-public partnership.

The Hong Kong government unveiled a "Starter Homes" scheme that will tap private firms for development, although the lack of details on the programme was a source of disappointment for some investors, the Bank of America Merrill Lynch (BofAML) said.

According to its industry overview, the government proposed launching a pilot programme for Starter Homes by the end of 2018 through a site at Anderson Road to offer 1,000 starter-home units.

The government did confirm that it is interested in working with developers.

However, BofAML thinks that the scale is small and the timing implies no immediate progress on developers’ conversions.

Farmland conversion has supported 9,900 units so far this year versus the 11,800 units from lease modifications or land exchanges, which include farmland conversions, from 2012 to 2016.

BofAML analyst Karl Choi said, "Such acceleration is larger than the scale that could be achieved in partnership with the government through 'Starter Homes' (7,100 units, as speculated by the press)."

He added, "If the government has to implement the scheme on an ongoing basis and at a reasonable scale, tapping into the farmland reserves owned by private developers as a readily available source of land supply will be inevitable."

However, BofAML added that whilst the government is on the right track to get people on the "property ladder," the schemes themselves will not accelerate housing production.