*********************************************
B. Improving People's Well-being
7. The ultimate goal of social development is to give people a better life. This is also my political vision. All government efforts should be geared towards the continuous improvement of people's livelihood.
Housing Policy
Present Situation
8. Housing is an issue of great public concern. The joint efforts of the Government and our people over the past decades have produced good results in this area. There are currently 2.6 million residential units in Hong Kong, accommodating 2.35 million households. Of those, 730 000 households live in public rental housing (PRH) and 380 000 in self-owned units acquired with government subsidies. In other words, almost half of the households in Hong Kong are benefiting from some form of housing subsidy by the Government. Of the 1.24 million households living in private properties, 870 000 are owner-occupants. Taken together, nearly 85% of households live in PRH units, subsidised home ownership scheme flats or their own private properties.
Public Housing
9. To have a comfortable home and a good job is not only the aspiration of our people. It is also the Government's vision. We have always been committed to meeting housing needs of the people. As early as 1954, we launched the first public housing construction programme for over 50 000 Shek Kip Mei residents rendered homeless in a fire.
10. Apart from PRH, the Government put in place the Home Ownership Scheme (HOS) and other subsidised home ownership initiatives. These schemes enabled PRH tenants to purchase their own homes so their units could be vacated for other people in need. Such schemes also helped other home seekers acquire their properties.
Private Market
11. The private market plays a major role in offering a wide range of options to meet the people's housing needs. In the late 1990s, our economy was hard hit by the Asian financial crisis and the collapse of the hi-tech bubble. Persistent deflation also exerted great pressure on the local property market. As a result, overall property prices dropped by more than 60%, and many properties slipped into negative equity. In 2002, after a housing policy review, the Government decided to withdraw from the property market progressively. The Housing Authority subsequently stopped the construction of HOS flats and other subsidised home ownership schemes.
Current Housing Policy
12. Let me highlight the basic principles of the Government's housing policy. First, our policy is to ensure that all Hong Kong people have a home. Second, it is the responsibility of the Government to supply sufficient land for the private sector to build a mix of residential units. Third, the Government will provide public housing for low-income people who cannot afford private rental accommodation. When private housing is in short supply and property prices rise to a level beyond people's purchasing power, the Government has to intervene and make adjustments through the provision of additional land and through subsidised housing policy. The HOS was previously the major subsidised housing scheme.
Challenges Ahead
13. After reviewing the market situation and listening to the views of different sectors, I have identified the following problems with our housing market.
Maintaining Public Rental Housing Production
14. We face two major challenges in maintaining an average production of 15 000 PRH units a year. The first is a shortage of land. Both PRH and private housing require land. To achieve our PRH production target, we need to open up new sites and explore ways to appropriately increase the densities and plot ratios of PRH projects without compromising the living environment. The second challenge is the objection of some local communities to PRH development. In my view, these objections are prejudiced and not in the public interest.
Private Property Prices Exceeding People's Affordability
15. Over the past year or so, the property market has been exceptionally vibrant because of the relatively small supply of private residential flats, abundant liquidity and persistently ultra-low interest rates. This is the root of people's difficulty in purchasing a home. Property prices in August this year increased almost 18% over August 2010. The mortgage to income ratio was 47% in the second quarter of this year. Both figures indicate that people face greater pressure and higher risks in home purchase.
16. In addition, owing to strong demand from Mainland and overseas investors for high-priced residential properties, developers have in recent years shifted towards the provision of high-end units. Although second-hand transactions on average accounted for over 80% of total turnover in the past years, there has been a significant drop in the supply of small and medium-sized first-hand residential flats in the low to medium price range. This has caused anxiety and pressure for potential buyers and affected market sentiment. This is especially so for lower-income families preparing to buy their first flat but who find prices beyond their reach.
Inadequate Land Supply
17. The cessation of HOS production and the slackening of the private property market in late 1990s and early 2000s resulted in a significant decline in the demand for land. Consequently, the planning work and infrastructure projects related to developing new land were adversely affected. When the market began to recover, property prices trended upwards. However, a drop in land sales over the past few years, combined with a decrease in private housing supply, sent property prices up further. To ensure the healthy and stable development of the property market, we will make available land for an average of 20 000 private residential flats each year in the next decade. I announced this target last year, aiming to build up a sufficiently large land reserve within a certain period to stabilise the supply of residential land.
Malpractices in Selling Properties
18. In recent years, many people have been dissatisfied with the selling practices of property developers. They have found that market transparency is low and that buyers can be easily misled. To further regulate the sale of first-hand residential properties, I announced last year that the Transport and Housing Bureau (THB) would set up a steering committee to discuss issues on regulating the sale of first-hand flats by legislation and to put forward practical recommendations within a year.
Ageing Buildings in Old Urban Areas
19. The building collapse in Ma Tau Wai Road last year heightened concern about the rising problem of ageing buildings in old urban areas. We responded quickly by proposing measures to improve building safety, including a multi-pronged approach to enhance building safety through legislation, enforcement, public education and support for building owners.
Problem of Sub-divided Units
20. The public is also concerned about building dilapidation, unauthorised building works (UBWs) and, in particular, "sub-divided units". Undoubtedly, "sub-divided units" pose risks to building safety, but they do provide accommodation for low-income people not eligible for public housing. Banning "sub-divided units" across the board is therefore not a solution.
Repositioning
Long-Term Commitment to Provide Public Rental Housing
21. According to the Public Housing Construction Programme of the Housing Authority, about 75 000 PRH units will be completed in the next five years. That means an average of 15 000 units each year. This production level, together with units recovered each year, should enable us to meet the target of maintaining an average waiting time of three years for General Waiting List applicants. Our pledge to meet this target is an important government policy to ensure social stability and harmony. Under no circumstances will this policy be changed. To honour our pledge, we will adjust flat production when the demand and supply of PRH flats so warrant.
New Policy for Resumption of Home Ownership Scheme
Targets of Assistance
22. We share the public's concern about rising property prices and the difficulty in buying affordable small and medium flats. The pressure is most felt by families whose household income exceeds the limits for PRH application but who may not be able to afford owning a flat. With a monthly household income under $30,000, these families are unable to bear large down payments and mortgage repayments. Their purchasing power is therefore rather limited in the current property market. Moreover, the supply of private flats that they can afford has been diminishing.
23. In response to the aspirations of low and middle-income families to buy their own homes, the Government now puts forward a new policy for the resumption of the HOS. The new scheme will be targeted at families with a monthly household income under $30,000, mainly first-time home buyers. Flats with a saleable floor area of 400 to 500 square feet will be offered at affordable prices.
24. The Government will allocate sites for this scheme. With the sites identified at this stage, we plan to provide more than 17 000 flats over four years from 2016-17 onwards, with an annual production of between 2 500 and 6 500 flats. For the first year, 2 500 flats can be made available. As more sites become available, we will set our planning target at 5 000 flats a year on average. To be flexible, the actual number of flats to be built or put up for sale each year will depend on demand at the time.
25. I have asked the Housing Authority to be responsible for producing flats under the new HOS. The first batch is expected to be ready for pre-sale in 2014 or 2015. To meet this target, the Housing Department has already started preliminary planning and investigations for sites identified in Sha Tin, Tsuen Wan and Yuen Long, and will commence similar work for other sites shortly.
Pricing Policy
26. The pricing and resale policies of the new HOS have been revised in light of changing circumstances. The prices of flats will be set with reference to the mortgage repayment ability of eligible households. For example, the price of a new HOS flat with a saleable floor area of 400 to 500 square feet will roughly be set in the range of $1.5 million to $2 million to make it affordable to a family with a monthly income of $20,000 to $30,000.
Resale Restrictions
27. Flats sold under the new HOS will be subject to resale restrictions as in previous subsidised housing schemes. Our initial plan is that within the first five years from the date of purchase, owners may only sell their flats to green form applicants or the Housing Authority. After five years, owners may sell their flats on the open market after paying a premium to the Housing Authority. This will enable owners to trade up and shift to the private residential market. In light of the rather inactive HOS secondary market, I have asked the Housing Authority to seriously consider measures that can facilitate upward mobility of those in the new scheme. When calculating the premium to be paid, the Housing Authority may take the subsidised portion of a unit's purchase price as a loan to the owner, the amount of which will not be adjusted even if the market value of the unit increases in future, and require the owner to repay this loan to the Housing Authority before selling the unit on the open market. When working out the details, however, we will ensure that the new arrangements are fair to existing HOS flat owners. As the arrangements will involve subsidising home ownership with public money, they should also be acceptable to the community as a whole.
28. I will ask the Housing Authority to work out implementation details of the new HOS, including the allocation ratio between green form and non-green form applicants, income and asset criteria for non-green form applicants, price benchmarks based on affordability and premium payment arrangements.
29. The new HOS will serve as a buffer when the private residential property market is in disequilibrium due to unbalanced demand and supply, as well as internal and external macroeconomic factors such as low interest rates and quantitative easing measures taken by other economies.
30. When the private residential property market cannot provide enough reasonably priced small and medium flats, the Housing Authority will make available a maximum of 5 000 new HOS flats on average each year for eligible buyers. When there are enough reasonably priced small and medium flats in the private market, we will adjust the number of subsidised flats to be built and sold for the year. We may even stop building and selling such flats.
Enhancing the My Home Purchase Plan
31. Some families, although earning up to $40,000 a month, and who can afford a property in the long run, do not have enough savings for a down payment. The Government, in collaboration with the Hong Kong Housing Society (HKHS), will continue to implement the My Home Purchase Plan (MHPP) to provide "no frills" small and medium rental flats so these families will have time to save up.
32. The MHPP is positioned above the new HOS. It offers another choice on the housing ladder.
33. The tenancy period of MHPP flats will be up to five years. To allow tenants to save according to their plans, the rent will not be adjusted during the tenancy period. The MHPP will also provide tenants with a subsidy, equivalent to half of the net rental paid during the tenancy period, to help them cover part of the down payment.
34. The public generally considers the MHPP sufficiently flexible. Given the volatility of the property market, if MHPP flats are to be sold at the prevailing market price, then tenants intending to buy such flats under the "rent-and-buy" arrangement may find their plans upset by soaring prices.
35. After considering public views, we will enhance the MHPP. First, apart from the proposed "rent-and-buy" mode, we will offer a "buy-or-rent" option which allows participants to buy their MHPP flats direct at market price without going through a rental period.
36. Under the MHPP, the initial market selling price will serve as the ceiling price of that flat. A participant choosing the "rent-and-buy" option will be guaranteed the "ceiling price" regardless of any rise in property prices within two years after termination of tenancy. This will protect participants from soaring property prices disrupting their plan for home ownership, and enable them to set more specific saving targets. Should prices fall, they can buy MHPP flats at the prevailing market price. The THB will discuss with the HKHS the implementation details.
37. The Government has already earmarked a number of sites for about 5 000 MHPP flats. The first development project at Tsing Yi will provide around 1 000 "no frills" small and medium flats. These are expected to be completed in 2014 and pre-letting will begin next year.
38. The new HOS and the enhanced MHPP, together with the measures implemented over the past year or so, such as increasing land supply (including selling sites with flat size and flat number stipulations), combating speculative activities, ensuring the transparency of the property market, and preventing excessive expansion in mortgage lending, will contribute to the healthy and steady development of the property market.
(To be continued)
Ends/Wednesday, October 12, 2011
Issued at HKT 11:28
NNNN
