Different Type of Housing Allowance
I made a wrong decision in choosing housing allowance when I joined the government in 1990. I should have chosen Private Tenancy Agreement (PTA) instead of Home Ownership Financial Scheme (HFS). Because PTA was until retirement, but HFS is only ten years. We only paid 20% of down payment (about HKD 560,000) of the flat cost HKD 2.85 million and rented out the 1333 square feet property called Kingsford Height, Flat B, 24/F, Babington Path, Hong Kong. Firstly, I didn’t discuss with my wife because she had been telling me how she hated moving flat. Secondly, I did not seek the advice of my colleagues concerning the renting or buying housing benefits. After taking the HFS to continue paying the remaining mortgage of the Private Ownership Scheme, Richland Garden, Kowloon Bay, and got 50% of the HFS monthly allowance of HKD 13,000 in pocket. We paid off quickly Richland Gardens. We needed to sell Richland Garden in order to continue getting the HFS. By then, I did not work for more than two years in the government, so I could not get the housing loan. Therefore, we had to sell the flat at Kingsford Height and made a profit of Hong Kong 1 million dollars. It seemed good. However, if we had decided to take the PTA, we would still have retained the 1333 s.f. property and had the benefit of increasing rental income every two years. In 2018, this property costs about HKD 20 million (USD 2.56 million). The leverage is 35 times because we only paid 20% down payment. More than that, a wise investor would re-mortgage the flat after certain years and so on. This way, one property can grow to more than one property. This is an opportunity cost. It was one of the biggest lessons I have learnt regarding decision making.