Secretary for Housing's Speaking Note at Special FC

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Following is speaking note of the Secretary for Housing, Mr Dominic Wong, at the special meeting of Finance Committee today (March 23):

Housing Expenditure

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Total public expenditure (recurrent + capital)

Total public expenditure on housing represents 15.1 per cent in 2000-2001.

(A) Recurrent public expenditure

Recurrent public expenditure on housing represents 6.1 per cent in 2000-01.

* is $12,845 million, a decrease of $40 million or 0.3 per cent over 1999-2000($12,885 million).

* comprises $12,168 million (94.7 per cent) for the Housing Authority, and $677million (5.3 per cent) for Government departments.

(a) Housing Authority

* Recurrent expenditure will fall from $12,210 million in 1999-2000 to $12,168 million in 2000-01, a decrease of $42 million or 0.3 per cent, due mainly to the completion in 1999-2000 of a major six-year building maintenance programme.

(b) Government departments

* Recurrent expenditure will increase from $675 million in 1999-2000 to $677 million in 2000-01, an increase of $2 million or of 0.3 per cent.

(B) Capital public expenditure

Capital public expenditure on housing represents 39.1 per cent of total public capital expenditure in 2000-01.

* is $30,550 million, a decrease of $3,595 million or 10.5 per cent (11.4 per cent in real terms) over 1999-2000 ($34,145 million).

* comprises $26,657 million (87.3 per cent) for the Housing Authority and $3,893 (12.7 per cent) for Government departments.

(a) Housing Authority

* Accounts for the bulk (87.3 per cent) of total capital public expenditure on housing.

* Capital expenditure by the Housing Authority will decrease from $29,645 million in 1999-2000 to $26,657 million in 2000-01, a decrease of $2,988 million or 10.1 per cent (11.1 per cent in real terms), due mainly to :

* Decrease in expenditure of $3,147 million (12 per cent), from $26,139 million to $22,992 million, for the construction of public rental and Home Ownership Scheme flats: from 184,000 in 1999-2000 to 165,000 in 2000-01.

(b) Government departments

* Accounts for 12.7 per cent of total capital public expenditure on housing.

* Capital expenditure by Government departments will decrease from $4,500 million in 1999-2000 to $3,893 million in 2000-01, a decrease of $607 million or 13.5 per cent (13.6 per cent in real terms), due mainly to the reduction of cashflow requirements in 2000-01 under the Home Starter Loan Scheme.

Developments in Housing Policy

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(A) Property market

* Property market remained generally stable in 1999.

* Prices moved within narrow ranges in 1999. Current prices are about 11 per cent higher than the trough in October 1998 (and 46 per cent below the recent peak in October 1997).

* The number of residential property transactions in 1999 (77,000) decreased by 10 per cent. Transactions in the primary market constituted 24 per cent of the total.

* The current market is largely end-user driven: about 99.4 per cent of new mortgage loans approved in 1999 in respect of residential properties were for owner-occupied units.

* Affordability of purchasers to buy flats has reached the highest level within the past 12 years (since 1988).

* Speculative activities were insignificant in 1999.

* We hope to see the property market continue to develop in a stable manner.

(B) Land provision for housing

* Steady and sufficient supply of land for housing. This is the key to meeting demand and keeping property prices at a stable and affordable level.

* Over the five year period 2000-01 to 2004-05, the Government will make available sufficient land for public and private housing development:

* Public housing: 168 hectares capable of producing 137,000 flats (equivalent to 27,400 flats per year).

* Public rental housing/Home Ownership Scheme: 150 hectares capable of producing 120,000 flats.

* Private Sector Participation Scheme: 18 hectares capable of producing 17,000 flats.

* Private housing: up to a maximum of 420 hectares capable of producing 185,000 flats (equivalent to 37,000 flats per year).

* These figures do not include:

* Flat production in the public sector from Housing Authority and Housing Society redevelopment.

* Flat production in the private sector from lease modification, land exchange and redevelopment of unrestricted leases.

* Actual annual production of private sector flats in any individual year is determined by private developers, on the basis of commercial considerations.

* In October 1999, we decided to embark on a partial shift in the means of providing assisted housing from the conventional "bricks and mortar" approach to the provision of loan finance. Details of our new policy initiative were agreed by the Housing Authority in January 2000.

* Subsidised home ownership flat production will be reduced by 4,000, 5,000, 6,000 and 6,000 units respectively in each of the four years beginning in 2003-04. Figures will be reviewed every year and the programme will be rolled forward annually.

* The Housing Authority will provide additional loans to replace the reduction in public housing flat production.

* The Government will offer additional land for sale to the private sector to meet the additional demand for private housing and to foster continued stability of the private sector property market.

(D) Waiting time for public rental housing

* With a steady supply of land and continued importance attached to public housing development and infrastructure, we remain on target to reduce the average waiting time for public rental housing to five years in 2001, four years in 2003, and three years in 2005.

(E) Encouraging home ownership

* Subsidised home ownership flats for sale. More continue to be built :

* Home Ownership Scheme, Private Sector Participation Scheme, Flats for Sale Scheme:

* 12,600 flats offered for sale in 1999-2000;

* 27,000 flats to be offered in 2000-01.

* Tenants Purchase Scheme:

* 27,000 flats offered for sale in 1999-2000;

* 27,000 flats to be offered in 2000-01.

* Buy or Rent Option:

* 2,700 flats offered for sale in 1999-2000;

* 3,000 flats to be offered in 2000-01.

* Secondary Market Scheme (for HOS and PSPS flats):

* 3,000 flats sold in 1999-2000.

* Loan and mortgage subsidy schemes to purchase flats in the private sector:

* Home Purchase Loan Scheme:

* 6,447 loans granted in 1999-2000.

* 6,000 loans to be granted in 2000-01.

* Home Starter Loan Scheme:

* 7,500 loans granted in 1999-2000.

* At least 6,000 loans to be granted in 2000-01.

* Mortgage Subsidy Scheme:

* 1,534 subsidies granted in 1999-2000.

* 3,200 subsidies to be granted in 2000-01.

End/Thursday, March 23, 2000

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