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Following is a question by the Hon Frederick Fung and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (February 25):
Question:
As revealed by the latest statistics published by the Rating and Valuation Department, the price index of private domestic properties (all classes) in December 2014 has hit a record high of 277.6, which is higher than that of 172.9 during the peak of the property market bloom in 1997 by over 60 per cent, and that of 206.1 at the inauguration of the current-term Government (i.e. July 2012) by more than 34 per cent. The price surge of small residential units (i.e. Class A units with a usable area of less than 40 square metres or 430.5 square feet) is most remarkable, as shown by a rise of the price index from 217.4 at the inauguration of the current-term Government to a record high of 303.2 in December 2014, with a rate of increase as high as 40 per cent. In this connection, will the Government inform this Council:
(1) given that property prices have hit record high time and again in spite of the series of measures launched by the current-term Government to stabilise the property market, whether the authorities have evaluated the effectiveness of these measures; whether they have assessed if certain practices of the Government (e.g. the adoption of 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 and the suspension of the implementation of the "Hong Kong Property for Hong Kong People" measure) have produced counter-productive results in stabilising property prices, and if these practices have been adopted for the sake of expediency without careful consideration, resulting in an effect going contrary to their expectation; and
(2) whether it has compiled statistics on the changes, since July 2012, in the percentage of the people's expenditure on rent and residential mortgage payments in their income; whether it has assessed if the current price and rental levels of domestic properties have gone beyond the affordability of the people; if the assessment outcome is in the affirmative, whether it has assessed the impacts of such a situation on society and people's livelihood; whether it has formulated any concrete short-term and medium-term measures (including demand-side management measures) to curb the rising trend of property prices?
Reply:
President,
My reply to the two parts of the question raised by the Hon Frederick Fung is as follows:
(1) Demand-side management measures
To address the overheated property market, the Government has introduced several rounds of demand-side management measures, including a Special Stamp Duty (SSD) (November 2010 and October 2012), a Buyer's Stamp Duty (BSD) (October 2012) and a doubled ad valorem stamp duty (DSD) (February 2013). These measures aim to combat speculative activities, ensure healthy and stable development of the property market, and accord priority to the home ownership needs of Hong Kong permanent residents (HKPR) in the midst of the present tight housing supply.
Demand-side management measures help stabilise the residential property market, and are effective in combating short-term speculative activities and curbing external demands. Increase in property prices has been moderated since the introduction of DSD in February 2013. During the first two months of 2013 (i.e. before the introduction of DSD), property prices increased by 2.7 per cent per month on average. During the one-year period from March 2013 to April 2014, the increase was only 0.1 per cent per month on average. Besides, stamp duty statistics from the Inland Revenue Department indicate that the number of short-term resale transactions (including confirmor transactions and resale within 24 months) remains at a low level in the fourth quarter of 2014, with a monthly average of 64 cases, or only 1 per cent of the total transactions. This represented a sharp decrease from the monthly average of 2 661 cases (or 20 per cent of the total transactions) during the period from January to November 2010 (i.e. before the introduction of SSD). Also, purchases of residential properties by non-local individuals and non-local companies during the fourth quarter of 2014 stood at a monthly average of 106 cases, or only 1.7 per cent (*Note) of the total transactions, markedly below the monthly average of 365 cases, (or 4.5 per cent of the total transactions) during the period from January to October 2012 (i.e. before the introduction of BSD).
We note that property prices in Hong Kong gradually picks up again since April 2014. The overall property prices rose by 13 per cent in 2014. Under the global context of low interest rates and quantitative easing, had the Government not introduced demand-side management measures timely in end 2012 and early 2013, the property market might have been even more exuberant, affecting our economic and financial stability.
The Government closely monitors the development of the property market, and will continue to adopt necessary measures to stabilise the property market. The Government has undertaken to review the demand-side management measures one year after the passage of the relevant Amendment Bills that promulgated the measures and report the outcome to the Legislative Council (LegCo). With regard to SSD and BSD, we plan to report the review outcome to the LegCo Panel on Housing in March 2015.
Extending the Home Ownership Scheme (HOS) Secondary Market to White Form Buyers
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To address the home ownership aspirations of White Form (WF) applicants, the Hong Kong Housing Authority (HA) launched the Interim Scheme to Extend the HOS Secondary Market to White Form Buyers (the Interim Scheme) in January 2013 to allow 5 000 eligible WF applicants to purchase flats without premium paid in the HOS Secondary Market. The Interim Scheme provides WF applicants with an additional channel to purchase subsidised sale flats.
According to the initial assessment of the HA's Subsidised Housing Committee (SHC), as at end September 2014, 2 161 applicants achieved home ownership through the Interim Scheme; as at end December 2014, the number of transactions under the Interim Scheme was 2 321. Without the Interim Scheme, these persons might have found it difficult to purchase flats in the private property market.
Our observation is that flat prices in the HOS Secondary Market rose relatively fast initially after the announcement of the Interim Scheme. This may be due to the fact that some HOS flat owners raised their asking prices in light of the new purchasing power in the market. However, flat prices have stabilised afterwards and generally followed the overall trend of flat prices in the private property market. Flat prices are subject to the influence of an array of factors including the economy, demand-supply and expectations. We should therefore interpret the figures with care. The SHC conducted an initial assessment on the implementation of the Interim Scheme on November 24, 2014, details of which have been uploaded onto the HA's website.
While the Interim Scheme is effective to a certain extent, with the experience of only one round of the Interim Scheme, the SHC considered that more empirical information is required to review the full and exact impact of the Interim Scheme on property prices. Given the strong demand for subsidised sale flats nowadays (especially from persons eligible for WF status), the SHC considered it more prudent to release one more round of the Interim Scheme with 2 500 quota in the second half of 2015. This can respond to WF applicants' home ownership aspirations on the one hand, and reduce the quota to a relatively conservative number on the other. A comprehensive review will be conducted thereafter to decide on the future of the Interim Scheme. Upon completion of the review, the Government will report the outcome to the LegCo Panel on Housing.
The Hong Kong Property for Hong Kong People measure
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The policy objective of the Hong Kong Property for Hong Kong People (HKPHKP) measure is to accord priority to HKPR in making use of our scarce housing land resources when there is a tight demand-supply situation in the property market. The Government announced in September 2012 that the HKPHKP measure would be applied to two residential sites in the Kai Tak Development Area. The two sites were sold through tender in mid-2013. Subsequently, the various demand-side management measures implemented by the Government targeting at the property market have effectively curbed the demand of non-local purchasers for residential flats and in turn accorded priority to the home ownership needs of HKPR. Hence, there is no pressing need to extend the HKPHKP measure to other sites available for sale at this stage. The Government will continue to closely monitor the property market and implement appropriate measures to facilitate the healthy development of the property market.
(2) The Government has been closely monitoring the development of the residential property market with reference to a series of indicators, including property prices, home purchase affordability, transaction volume, the supply of residential properties, as well as changes in the local and external economic situations.
Under a tight demand-supply balance and the ultra-low interest rate environment, the residential property market has been active during most of the past few years. Home purchase affordability ratio (i.e. the ratio of mortgage payment for a 45-square metre flat to median income of households, excluding those living in public housing) rose from about 50 per cent in the third quarter of 2012 to around 58 per cent in the fourth quarter of 2014, indicating an increase in the home purchase burden. Over the same period, leasing affordability ratio (i.e. the ratio of rentals for a 45-square metre flat to median income of households, excluding those living in public housing) stayed at around 44 per cent.
Maintaining the healthy and stable development of the private property market is one of the important housing policy objectives of the Government. The Government will continue to adopt a two-pronged approach. On the one hand, we will adopt a supply-led strategy and continue to increase supply of land and housing to address the demand-supply imbalance problem at source in the long run. On the other hand, we will curb external and speculative demands as and when necessary to help stabilise the property market and prevent the adverse consequences arising from an overheated market.
*Note: If purchases of residential properties made by local companies are counted, the relevant monthly average in the fourth quarter of 2014 would be 177 cases, or 2.8 per cent of total transactions.
Ends/Wednesday, February 25, 2015
Issued at HKT 12:52
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