8
Pricing policy
On pricing policy, the basic principle used to determine flat prices is affordability. Since the Government only charges the Housing Authority a nominal land cost at 35% of the building development cost, these flats can be offered for sale at a significant discount on market prices. The guiding discount rate adopted by the Housing Authority is 30%. However, as private property prices rose in the past few years, the discount rate was gradually increased to 48% in 1993 and 1994 to assist home buyers. As property prices softened since April last year, the discount rate was adjusted slightly downwards to 45% in the first half of this year. Thus the discount rate movements reflect affordability in relation to property prices, which principle remains the prime consideration in pricing flats. We shall continue the practice of A few reviewing the discount rates in relation to affordability for future sales. members of this Council commended on the profits to the Housing Authority from the sale of HOS flats. A large proportion comes from government subsidy on land as have mentioned earlier. In any case, the profits are entirely plough back into the production of more subsidised housing for those who are in need of housing assistance.
Mortgage loans and repayments
As regards mortgage loans, the Housing Authority has reached agreement with lending institutions to provide loan financing to HOS/PSPS flat purchasers on very favourable terms. Purchasers may borrow up to 90% of sale prices, and in the case of 'green form' buyers loans up to 95% of sale prices are made repayable over a maximum period of 20 years. The interest rate charged is only half a percentage point above the prime rate. In order to obtain these favourable terms from lending institutions. the Housing Authority provides a 100% guarantee. These financing arrangements have worked well. It is difficult to imagine any further improvement to the already very favourable terms offered to borrowers.