Since Hong Kong scrapped its property cooling measures in February, two contrasting situations have emerged in the housing market. Private market transactions have surged, with new projects oversubscribed, while the subsidised housing market has seen sluggish sales, with transactions cancelled and deposits forfeited.

Some put this down to the improved affordability of private homes after the price index fell in March by 23 per cent from the record high in September 2021, causing more buyers to choose private housing. But this risks oversimplifying the situation. While some demand has been channelled to the private market, others are holding back, for various reasons.

Potential buyers of subsidised housing units can be split into three groups. The “upper middle class”, earning just below the income ceiling, is most likely to switch to the private market as prices fall.

Then there is “core middle class”, earning close to the median household income, who can hardly afford to buy in the private market even at the current lower prices. Amid market uncertainty, they are likely to wait and see, especially since a subsidised home is a once-in-a-lifetime opportunity.

The third group is known as “green form households”, public rental tenants who qualify to buy subsidised flats under the Green Form Subsidised Home Ownership Scheme (GSH). Last year, a Housing Authority survey found that over 20 per cent of public rental households would consider buying a subsidised home.

But despite their aspirations, most newly completed subsidised homes remain too small to offer a genuine upgrade.

Across the three groups, subsidised homes remain the only viable option for the “core middle class” and “green form households”. Based on Hong Kong’s household income distribution last year, around 40 per cent of households are eligible for subsidised housing. But subsidised housing made up only 10 per cent of new homes completed between 1997 and 2023.