Following is a speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, at CoreNet Global 2005 Asia Summit today (March 22):
Mr Watton, distinguished guests, delegates, ladies and gentlemen,
It is my privilege to welcome you all to the CoreNet Global 2005 Asia Summit in Hong Kong. We are honoured to be the Asia destination of your Summit for the second time. This is indeed a very special occasion, bringing together real estate professionals, economists and business leaders from different parts of the world to share experiences and insights and to promote best trade practices. I wish the Summit every success.
Repositioned Housing Policy
I have been asked to say a few words about the recent housing scene in Hong Kong from the policy perspective.
The residential property market in Hong Kong has rebounded strongly over the past year or so, after almost seven years in the doldrums, marked by weak domestic consumption, persistent deflation and rising unemployment. This sad state of affairs started with the Asian financial crisis in 1997 when private residential prices within the region took a tumble. We felt its impact throughout our community as increasing numbers of property owners found themselves faced with sharp declines in the values of their properties.
The situation at the time called for concrete actions to help stabilise the property market. It was against this background that the Hong Kong Government revamped its housing policy in November 2002 in a bid to revitalise the market.
The major problem facing us then was the excessive supply of housing stock, following heavy investment by developers in the market in the later half of the 1990s. The Government itself, through the Housing Authority, pursued a vigorous public housing building programme which included both public housing for rental and public housing for sale. There was an imbalance between supply and demand, heavily tilted towards the supply side. And we also had an unnecessary artificial competition between the private sector and the Housing Authority in the home buyers market.
Assistance for those in need
Our first task was to reaffirm our public commitment to continue to provide public rental housing for those in need and to ensure that no one would be rendered homeless by a lack of means. In this respect, the Housing Authority pledged to maintain a building programme which would produce sufficient public housing units in order to maintain an average waiting time of about three years for applicants for public rental housing on the waiting list.
Minimal market intervention
Our second task was to keep market intervention to a minimum and to avoid any unnecessary duplication of effort. We took note of the prevalent falling property prices and a growing variety of flexible mortgage products available in the market at the material time which had made residential accommodation in the private sector a lot more affordable than ever. We felt that the original rationale for public assisted home ownership initiatives was becoming much less clear-cut. The time had come for the Housing Authority to decide whether to continue to provide subsidised housing under the Home Ownership Scheme.
This Home Ownership Scheme had been a component of our housing policy for a considerable period of time. It provided home ownership for those citizens who were too well off to qualify for rental public housing but who found private housing ownership less than affordable. We took into account the trend of the private market producing more and more small-size and hence cheaper and more affordable flats, the over-supply situation, and the readily available mortgage for home ownership. But first and foremost, we believed that we should rely on market economy and the merits of allowing the property market to operate freely on its own dynamics.
We therefore took the decision to discontinue the production of subsidised Home Ownership Scheme units for sale. We also took the opportunity to abolish our loan schemes which provided subsidised financing for home purchase in order to remove these interventionist measures as we believed that buying property should be a matter of personal choice and affordability, rather than through government subsidies or incentives.
Fair and stable environment
Our third task was to provide a fair and stable environment conducive to the long-term healthy development of the property market. In order to make sure that the basic market information was made available to everyone in a bid to help restore market confidence, we released, on a regular basis, official housing statistics to give the public a clear picture of the supply situation. The published data covered such information as residential units under construction, newly completed units and unsold completed units. This new initiative had been well received by the community and the real estate sector.
No account of our housing policy is complete without making reference to our land policy, which plays an integral role in our housing supply. Government, being the largest land owner in Hong Kong, must ensure that there is adequate supply of land to meet community needs. Under the repositioned housing policy, the supply of government land has been mainly triggered from the Application List system. There is no longer a scheduled land auction as in the past whereby land would be auctioned once every two to three months regardless of whether there is a demand for land. Under the Application List system, Government compiles a list of land available for sale upon application by developers on an annual basis. A developer who is interested would have to submit to Government an application together with a guaranteed bid price for a site in the Application List. If the guaranteed bid price matches or exceeds Government's assessed open market value of the site concerned, the site would then be put up for auction or open tender.
Application List system
The Application List system is a market-driven mechanism, in that land is triggered for auction or tender, only if developers have interest and apply. This allows flexibility for the market to determine the quantity and the timing of land to be put up for sale, which will help promote stable and healthy development of the property market in the long term.
2005-06 Application List
We have just published the new Application List for the year 2005-06. The List includes a total of 35 sites and provides greater choices in terms of size, location and variety of uses, in order to meet the needs of the community and the aspirations of developers. A number of sites suitable for luxurious residential developments have been included in the List; there are also a number of small sites to suit the needs of the small or medium-sized developers.
Come to Fruition
Last month, in its observations from the latest "Article IV" consultation with Hong Kong, the International Monetary Fund highlighted the progress we have made in reducing our direct involvement in the property market and our efforts in enhancing the transparency of land supply situation. Such international recognition gives us added assurance that our repositioned housing policy is heading in the right direction.
As I have just said at the outset, the performance of our private housing market in the past 18 months has been most encouraging. Transaction volumes and property prices have picked up considerably, particularly in the upper end of the residential market. Total sales in 2004 exceeded 100,000 transactions, the highest level recorded since 1997. The overall residential property price index at the end of 2004 was up 27% compared to the year before, and the high-end market saw an even bigger increase of 36%. While we continue to caution prospective home buyers to carefully consider their needs and financing ability before deciding to buy properties, we are pleased to see that as a result of market recovery, the negative equity situation in Hong Kong has significantly improved. These favourable results have boosted market confidence and enhanced our economic outlook. I am confident that our real estate sector will continue to play an important role in helping to foster a robust, sustainable economic environment for the long-term development of Hong Kong.
Finally, I hope all of you, in particular those overseas delegates, have a pleasant stay in Hong Kong and feel the vibrancy and dynamism of our City of Life.
Ends/Tuesday, March 22, 2005