************************************************
Following is a question by the Hon Frederick Fung Kin-kee and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (October 31):
Question:
As revealed by statistics from the Rating and Valuation Department, the price and rental indices of private domestic properties have been rising continuously for seven months. The latest price index (for August) has reached a record high of 210.6, which is higher than that of 172.9 during the peak of the bloom in the property market in 1997 by over 20%, and that of 179.8 in January this year by 17%, as well as that of 206.1 upon the inauguration of the Government of the new term in July by more than 2%. The price surge of small flats (i.e. Type A flats with a usable area of less than 40 sq m or 430.5 sq ft) is most remarkable, as shown by a rise of the price index from 185.6 in January to 222.9 in August this year, or a rate of increase as high as 19%. The latest rental index reached 146.5 in August, representing a rise of 10% when compared to 133.2 in January. Moreover, the Centa-City Leading Index, which reflects price movements in the second-hand property market, has also hit record high time and again over the past couples of weeks. In this connection, will the Government inform this Council:
(a) whether it has analysed and assessed the reasons for the continuous price spiral of private domestic properties, and the impact of the third round of quantitative easing monetary measures launched in the United States on the price and rental of private domestic properties in Hong Kong; whether it has assessed if the current price and rental of domestic properties have gone beyond the affordability of members of the public; if there is such a situation, whether it has assessed its impact on society and people's livelihood, and whether any concrete short-term, medium-term and long-term measures will be put in place to improve the situation;
(b) given that property prices have hit record high time and again despite the series of measures launched by the Government of the new term to stabilize the property market since its inauguration, whether the authorities have evaluated the effectiveness of these measures; given that some members of the public have pointed out that the arrangement to allow white form applicants to purchase flats under the Home Ownership Scheme (HOS) with premium not yet paid in the HOS secondary market has obviously pushed up the prices of such kind of flats, whether the authorities have assessed if the above measures have been implemented for the sake of expediency without careful consideration, resulting in an effect going contrary to their expectation; and
(c) whether, in formulating measures to stabilize the property market, the authorities have considered factors such as the level of property prices and the affordability of members of the public, etc.?
Reply:
President,
My consolidated reply to Hon Frederick Fung Kin-kee's question is set out below:
As the Chief Executive pointed out in his Manifesto, housing is the livelihood issue which is of prime concern for most in the community. Decent housing is the foundation of a stable society. As such, addressing the housing issue is one of the top priorities of the current term Government. In fact, the Government has been responding to the situation through the introduction of long, medium and short-term measures in four areas, namely, increasing land supply; combating speculative activities; enhancing the transparency of property transactions; and preventing excessive expansion in mortgage lending, with a view to ensuring the healthy and stable development of the property market.
Fuelled by the abundant liquidity and low interest rates, overall flat prices have risen by 20% during the first nine months of 2012, despite a general slowdown in the global and local economy over the same period. This clearly suggests that the property market and the local economy are heading in different directions. Indeed, with prices rising significantly beyond income growth, property prices have risen to a level that is beyond the affordability of the general community. With the announcement of the third round of quantitative easing measures by the USA, there is a growing risk from renewed funds flowing into Hong Kong lately. This in turn will have further pressure on the property market, which had become even more exuberant. Thus the risk of a property bubble forming has increased. Left to itself, this situation could undermine the macroeconomic conditions of the community as well as the stability of our financial system, thus threaten people's livelihood. Even with prevailing low interest rates, the affordability ratio has increased to 50 per cent as suggested by the preliminary figures for the third quarter of 2012. If interest rates were to go up by three percentage points to the level before the financial crisis in 2007, the ratio would shoot up to 65 per cent, far exceeding the average of 50.4 per cent in the past 20 years.
In view of the above development, the Financial Secretary launched a new round of demand-side management measures on October 26, 2012. He stated that the property market and the local economy are heading in different directions. The objective of the two new measures is to help alleviate the demand for housing by addressing the needs of Hong Kong Permanent Residents (HKPR) and further curb short-term speculative activities, under the exceptional circumstances of an overheated property market.
Specifically, the Government will amend the Stamp Duty Ordinance to adjust the duty rates and extend the coverage period in respect of the existing Special Stamp Duty (SSD), and introduce a Buyer's Stamp Duty (BSD) which will be charged at a flat rate of 15 percent for all residential properties acquired by any person (including companies), except a HKPR. This will be levied on top of the existing stamp duty and SSD, if applicable. We have issued a LegCo brief to this Council on October 26, 2012 to explain our proposals. We will provide further details at the joint meeting of the Housing Panel and Financial Affairs Panel scheduled for November 2, 2012.
There is no doubt that the fundamental issue that must be tackled to address the current housing situation is the land supply. We will continue with our efforts to increase land and flat supply to tackle the problem at source. Since 2010, through the Steering Committee on Housing Land Supply chaired by the Financial Secretary, the Government has been working to expand land resources for housing development. These include releasing suitable industrial land, "Government, Institution or Community" (G/IC) sites, other government sites and green belt areas for housing development. With these efforts, the supply of residential flats for the next 3-4 years is expected to increase to some 65 000 units.
In August/September 2012, the Government also announced a basket of short and medium-term measures to address the fundamental issue of land and flat supply, including switching the rent-to-buy scheme to direct sale for flats at the Hong Kong Housing Society's Tsing Luk Street development, selling 830 unsold Home Ownership Scheme flats early next year, releasing 36 G/IC and government sites for residential use, exploring measures to facilitate revitalization of industrial buildings for transitional residential use, and introducing the "Hong Kong property for Hong Kong people" policy to be piloted at two sites in Kai Tak Development Area.
For the medium to longer term, we have identified more suitable sites for development purposes, including housing. These include a number of new development areas (e.g. the North East New Territories, Hung Shui Kiu and Tung Chung New Town Remaining Area), various quarry sites, Kam Tin West Rail Kam Sheung Road Station/Pat Heung Maintenance Depot and adjoining areas, and agricultural land in North District/Yuen Long currently used mainly for industrial purposes or is deserted. In addition, the Government is also exploring options for reclamation outside of Victoria Harbour and using rock caverns for relocating existing public facilities (e.g. sewage treatment works) to release sites for housing development.
The Government has also taken steps to help address the home ownership needs of the eligible buyers with White Form (WF) status before new HOS flats are completed in 2016-17, and to facilitate the turnover of HOS flats. The Chief Executive announced in July 2012 that starting from next year, 5 000 buyers with WF status will be allowed each year to purchase HOS flats with premium not yet paid on the HOS Secondary Market. There are currently more than 250 000 HOS flats, 120 000 Tenants Purchase Scheme flats and 9 000 Flat-for-Sale Scheme flats with premium not yet paid on the Secondary Market. We consider that the rise in property prices in the past few months was caused by a series of factors as mentioned above. We will review the effectiveness of the initiative to allow 5 000 buyers with WF status each year to purchase HOS on the Secondary Market after its implementation, taking into account feedback on the initiative.
Maintaining a healthy and stable property market is an important issue for the Government. We shall continue to monitor the market closely. If the property market development continues to deviate from economic fundamentals, we shall introduce further measures to maintain the healthy and stable development of our market to safeguard our social and financial stability.
Ends/Wednesday, October 31, 2012
Issued at HKT 13:35
NNNN
