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Following is the translation of the speech by the Secretary for Housing, Mr Dominic Wong, on the motion "Negative Assets" by the Hon Howard Young in the Legislative Council today (February 21):

Madam President,

Housing Policy

Housing development has all along been the concern of our community. Though people may have different views on the pace of housing development or individual measures, I believe that the public generally agree with the Government's overall housing policy objective of achieving better housing for all through an adequate supply of affordable housing for ownership or rent.

The HKSAR Government has set out and announced a number of concrete measures to achieve our policy objective. The four most important ones are: first, we will provide 50,000 housing assistance opportunities annually to those who need assistance. These include public rental housing, subsidised home ownership flats and loans to purchase flats in the private property market. Secondly, we will reduce the average waiting time for public rental housing flats to three years by 2003. Thirdly, we will provide sufficient land and individual assistance through government departments to encourage the development of private housing. Fourthly, we will promote wider home ownership and work towards the goal of increasing the home ownership rate to 70 per cent.

Madam President, it can be seen that the overall housing policy objective of the Government is clear and well defined. Our policy measures are also concrete and practical. Of course, our policy must tie in with the pace of society and changing circumstances. We make changes not because (as some people say) our 'policies are chaotic'. On the contrary, we respond to new developments whenever necessary, and that is what a responsible Government should do.

Home Ownership Scheme

Madam President, I thank Members for their views on our housing policy. What concerns them most is the Home Ownership Scheme (HOS). Since its implementation in 1978, the scheme has been very much welcomed by the community. The construction of HOS flats has two aims. First, we hope to provide home ownership opportunities to families which do not qualify for public rental housing and which at the same time cannot afford flats in the private sector. Secondly, we hope to recover public rental flats from better-off tenants who have purchased their own homes through the HOS, and to re-allocate such rental flats to other more needy families on the Public Rental Housing Waiting List. In the past five years, the Government has recovered an average of about 20,000 rental flats a year from 'Green Form' applicants. In other words, about 20,000 families on the Waiting List have benefited from the implementation of the HOS, and have been allocated public rental flats earlier. In the meantime, we have increased the overall home ownership rate in Hong Kong to 53 per cent, compared with 33 per cent in 1982. In short, the HOS is successful and has won public recognition.

Subsidised Housing Loan Schemes

In addition to the HOS, the Government started to provide housing loans as early as 1987, making it another avenue for home ownership by low-income households. As a matter of fact, the number of HOS flats for sale is still much greater than the quota for subsidised housing loans.

Compared with the past, local property prices have gradually stabilised. Home purchase is now within the reach of many more households. Under the circumstances, in order to allow a wider choice for prospective home buyers eligible for housing assistance, the Government, in consultation with the Housing Authority, decided early last year to embark on a partial shift in the method of providing housing assistance from the conventional "bricks and mortar" approach to the use of subsidised housing loans. The Housing Authority has decided to reduce the production of HOS flats by 21,000 units over a four-year period from 2003/04 to 2006/07. The reduction programme will be reviewed and rolled forward annually. Housing loans will be provided instead to eligible households to replace flat reduction.

Briefly, providing housing loans partly to replace the construction of HOS flats has advantages. First, prospective home buyers will have a wider choice of housing. Secondly, this can assist needy households in a more cost-effective manner. Thirdly and more importantly, the Government can respond to short-term fluctuations of housing needs more swiftly and flexibly.

Value of Home Ownership Scheme

Notwithstanding the advantages of using housing loans to partly replace the construction of HOS flats, the Government shares the views of the general public that the HOS should be retained at this stage. First, we can be sure of the number of subsidised flats on supply each year. Secondly, the HOS is still very much welcomed by the general public as a means of achieving home ownership. In recent years, the sale of HOS flats is over-subscribed by three to seven times. In other words, there is still demand for HOS flats.

The Government understands that efforts should be made to avoid competition between the HOS and the private residential property market. They should target at different purchasers. Therefore, the Government will review from time to time the rationale behind various housing assistance schemes and the progress of implementation, including application criteria for the HOS, in order to ensure that public housing resources will only be allocated to needy families. In the coming years, not more than 20,000 HOS flats will be sold annually. The number of HOS flats to be produced will also be reviewed regularly by the Government.

Owners of Negative Assets

Madam President, the Government understands that home ownership is the most important investment for a person. The Government is sympathetic with owners of negative assets. With the recovery of the economy and the development of a stable and healthy property market, owners of negative assets will experience a gradual improvement to their predicament. The HKSAR upholds the principle of free economy, and will allow private property market to operate freely without unnecessary intervention. The Government will not consider setting up any funds or loan schemes to assist owners of negative assets. The public is also generally against the idea of the Government providing financial assistance to individual investors. In fact, the banking sector has been sympathetic in adopting measures, based on individual circumstances, to help loan borrowers holding negative assets, who have difficulty in paying back loans. According to figures of the Hong Kong Monetary Authority, the loan delinquency ratio for default payments over three months stood at about 1.3 per cent in December last year, which situation is still acceptable. This also reflects that most property owners continue to repay their mortgages.

Conclusion

To conclude, Madam President, the Government's housing policy and objectives are clear and well defined. For the reasons that I have outlined, the Government does not agree with Part I of the Motion today relating to housing policy and measures. Nevertheless, since housing affects everyone's interests, the Government needs to strike a balance among the differing interests of various sectors. We will therefore continue to listen to people's views and take decisive measures when necessary.

The Secretary for Financial Services will respond to other proposals in the Motion.

Thank you, Madam President.

End/Wednesday, February 21, 2001

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