HK's new housing policies help soothe overheating property market

Hong Kong Special Administrative Region (HKSAR) Chief Executive Donald Tsang announced the government's housing policies for the coming years on Wednesday, focusing on land supply and an enhanced scheme of subsidized housing.

The housing plan, an important part of the whole policy address delivered by Tsang, clarifying the role of the government and promising to help out potential "sandwich class" home buyers, was regarded as a useful way to soothe the already overheating property market in Hong Kong.

LAND SUPPLY

"Housing is currently the greatest concern of our people," Tsang said in his address at the city's 60-member Legislative Council. "The major role of the government is to supply land."

While since January of 2009, Hong Kong house prices had risen about a third, owing to exceedingly low mortgage interest rates, an influx of foreign capital and insufficient housing supply, which upset the city's residents.

Hong Kong's housing price was one of the most expensive among the world's major cities. In his address, Tsang promised to ensure sufficient land supply and provide quality infrastructure to maintain a fair and stable environment for the healthy and sustainable development of the property market.

He also said the government would on its own initiative put up for auction land "if there is an upsurge in residential flat prices and developers do not actively apply for land".

"We estimate that a total of 61,000 first-hand private residential units will come on the market in the next three to four years," he said.

He also expected that in the next 10 years, on average land needs to be made available annually for some 20,000 private residential flats.

"The new auction method provides more flexibility for the government to adjust the property market", said Buggle Lau, Chief Analyst of Midland Realty in Hong Kong. "It shows the initiative of the government."

Lau also held that solving the problem by enhancing land supply was a smart method, which could help guarantee the stable development of the property market in the long term.

NEW PLAN

Meanwhile, the city government also launched a new subsidized plan, My Home Purchase Plan, under which the city government will provide land for the Housing Society to build "no-frills" small and medium flats for lease at prevailing market rent.

It is open to people with a household income under 39,000 HK dollars (5,025 U.S. dollars) or a personal income under 23,000 HK dollars.

The tenancy period will be up to five years, within which the rent will not be adjusted. Tenants can buy the flat or another flat up to two years after the completion of the five-year lease.

They will receive a subsidy equivalent to half of the net rent they have paid during the tenancy period, and use it for part of the down payment.

The first project will provide about 1,000 flats by 2014 while a total of some 5,000 flats will be built under the Plan.

"The policy provides the sandwich class with flexibility in their home purchase plan, including the choice of opting to purchase the flat they rent, another flat under the plan, or a flat in the private market," Secretary for Transport and Housing of the government Eva Cheng commented late Wednesday.

"The plan is good as it will not reduce the supply of private residential land or land for public rental housing", said Louis Chan, managing director from Centaline Property, a real estate agency.

Apart from the newly introduced subsidized housing plan, the government also endeavored to improve citizen's living quality by increasing supply of small and medium flats, monitoring the sale of flats, and tackling problems about building safety and management.

"Clearly, the city government means well, but we have to wait and see the real effect of all the new policies unveiled. That is what really matters," said Edwin Chan, professor in the department of building and real estate of the Hong Kong Polytechnic University. (1 US dollar is equivalent to 7.759 HK dollars)

Source: Xinhua