FS unveils measures to prevent volatility in property market

     The Financial Secretary, Mr John C Tsang, today (February 24) in the 2010-11 Budget unveiled new measures to prevent volatility in the property market.

     He announced four sets of measures concerning supply, speculation, price transparency and mortgage lending.

     The Financial Secretary said that since October 2008 more than $640 billion in liquid capital had flowed into the Hong Kong market, which had increased the potential risk of asset-price bubbles.

     There were also concerns about a reversal of capital flows or a rebound in interest rates, which could make asset prices even more volatile and affect the stability of the financial system and the recovery of the real economy.

     Mr Tsang said the Government had been closely monitoring the situation and found that by January this year the prices for some luxury flats had returned to 1997 peaks, while prices of small and medium-sized flats were about 23% below that of 1997 levels.

     Overall, property prices were 8% above pre-financial crisis levels, he said.

     "While the local property market is still reasonably healthy, we must not lose sight of the increasing risk of a property bubble developing with the global economic recovery and the abundant liquidity in the international financial markets," he said.

     On supply, Mr Tsang said that private residential unit completions would rise to 14,300 in 2010, with an estimated 53,000 private residential units coming onto the market in the next three to four years.

     To further increase supply, depending on market conditions, the Government will improve the Application List system by putting up several urban residential sites on the List for sale by auction or tender in the coming two years if they had not been triggered.

     To increase the supply of small and medium-sized flats, the MTR Corporation will be asked to increase the supply of flats in its West Rail property development, while the Urban Renewal Authority will be asked to do the same in its developments.

     In addition, a 1.2-hectare site near the West Rail Long Ping Station in Yuen Long will be put to open tender for private residential purpose. The supply of small and medium-sized flats in the development would be specified in the land sale conditions.

     Mr Tsang said the Housing Authority would actively explore ways to revitalise the sale of Home Ownership Scheme (HOS) flats, which had more than 300,000 apartments mostly priced below $2 million eligible for resale in the open market or the HOS secondary market.

     To curb speculation and reduce the risk of asset bubbles, Mr Tsang said a higher rate of stamp duty would apply on properties valued at more than $20 million from April 1. Stamp duty on such transactions will rise from 3.75% to 4.25%, and stamp duty payments could not be deferred.

     "We will closely monitor the trading of properties valued at or below $20 million. If there is excessive speculation in the trading of these properties, we will consider extending the measures to these transactions," he said.

     Mr Tsang said that to ensure market transparency, the Chief Executive had announced in November 2009 three measures requiring developers to make public details of transactions within a shorter time limit, to list the price per square foot in saleable area of individual flats, and to adopt a reasonable floor numbering system.

     "We will not tolerate market players disseminating confusing information in an attempt to manipulate the market," he said.

     "I have asked the Secretary for Transport and Housing to enhance the regulation of property transactions to ensure that citizens can buy and sell properties in a fair and transparent market.

     "The Bureau is now exploring further measures to strengthen the regulation of the sale of first-hand, uncompleted private residential flats."

     The Financial Secretary said the Government would strive to prevent an excessive expansion of mortgage lending that might fuel an asset price bubble.

     He said that last October the Hong Kong Monetary Authority (HKMA) had issued guidelines to banks, lowering the loan-to-value ratio for mortgages on properties valued at $20 million or above and requiring banks to process mortgage loan applications prudently.

     He said the HKMA had been asked to closely monitor the situation and to take further measures when necessary to strengthen the prudent regulation of banks.

     "It is the policy objective of the Government to ensure a healthy and stable development of the property market," he said.

     "The measures announced strike a balance between reducing the risk of a property bubble and preventing public policies from causing unnecessary fluctuations in the property market.

     "It is very important to maintain this balance particularly at this point in time, in the face of uncertainties in the external environment."

Ends/Wednesday, February 24, 2010
Issued at HKT 13:20