LCQ2: Demand-side management measures for the property market
There are views pointing out that while the incumbent Chief Executive has stated clearly in his first Policy Address that solving the housing problem tops the agenda of the current‑term Government, the various demand-side management measures for the property market, which are commonly known as "harsh measures", are not mentioned at all in that Policy Address. In addition, the Government of the past several terms had all indicated that the policy objective of introducing these measures was to curb external, investment and speculative demands under the "exceptional circumstances" of low interest rate, abundant liquidity and serious demand-supply imbalance, so as to ensure the healthy and stable development of the property market and accord priority to meeting the home ownership needs of Hong Kong permanent residents ("HKPRs"). However, the recent global and local economic conditions are entirely different from those in previous years when such measures were introduced, and the supply of land and housing has also been increasing. In this connection, will the Government inform this Council:
(1) whether the authorities have, in the light of the global and local economic conditions in the most recent year, reviewed the policy objective, the effectiveness, and the need for continuation of such measures; if so, of the details; if not, the reasons for that;
(2) given that some members of the public who plan to purchase homes have pointed out that such measures have not become a stepping stone to assist HKPRs in purchasing their homes, but have instead become a stumbling block to home ownership amid the current economic environment, whether the authorities will relax or even remove such measures, so as to effectively assist HKPRs in purchasing their homes; and
(3) as it is learnt that the Buyer's Stamp Duty ("BSD") has substantially increased the cost of acquisition of flats in old buildings by developers and a large amount of capital can only be recovered upon demolition of the buildings, whether the authorities will adjust the arrangement of "refund after collection of duty" or even abolish BSD in this respect, so as to expedite urban renewal and increase housing supply?
Maintaining the healthy and steady development of the private residential property market is one of the important objectives of the Government's housing policies. The Government has all along adopted a two-pronged approach by striving to increase land and housing supply to meet demand, and introducing demand-side management measures to combat short-term speculative activities, curb external demand and reduce investment demand. My consolidated reply to the questions raised by the Hon Loong is as follows:
The prevailing demand-side management measures for residential properties (including Special Stamp Duty (SSD), Buyer's Stamp Duty (BSD) and New Residential Stamp Duty (NRSD)) have been effective since their introduction. The number of short-term resale transactions (including confirmor transactions and resale within 24 months) accounted for 0.9 per cent of the total transactions from January to November 2022, which was substantially lower than the 20 per cent before the introduction of SSD (i.e. from January to November 2010). During the same period, the number of residential property transactions involving non-local individuals and non-local companies stayed low at 0.5 per cent of the total transactions, which was much lower than the 4.5 per cent before the introduction of BSD (i.e. from January to October 2012). Meanwhile, among residential property transactions where buyers were Hong Kong permanent residents (HKPRs), 97 per cent of the cases involved buyers who did not own any other residential property in Hong Kong at the time of acquisition, which was significantly higher than the 75 per cent before the introduction of NRSD (i.e. from January to November 2016). These figures illustrate that the demand-side management measures have been effective in reducing short-term speculative activities as well as external and investment demands, and have served the Government's objectives of stabilising the residential property market, which is crucial to the sustainable development of Hong Kong as a whole, while according priority to the home ownership needs of HKPR amidst the prevailing tight housing supply situation.
The Government has been closely monitoring the residential market development and would take into account a number of factors including the pace and magnitude of property price changes, transaction volume of residential properties, future supply, economic conditions and outlook, as well as overall market sentiment. The overall private residential price index in November 2022 remained at a high level despite its retreat in comparison to that at the beginning of 2022. The mortgage-to-income ratio (i.e. the home purchase affordability ratio) remained at an elevated level of 73 per cent in the third quarter of 2022, which was significantly above the long-term average of 49 per cent over the 20-year period from 2002 to 2021, indicating that the overall residential property prices are still at a level beyond the general public's affordability. In terms of residential property transactions, the number of monthly average transactions from January 2021 to November 2022 was around 5 100, which was similar to the number of around 5 300 in the ten years following the introduction of the demand-side management measures in November 2010 (i.e. from December 2010 to December 2020). On the supply side, based on the latest estimates as at end-September 2022, the projected supply of first-hand private residential units in the coming three to four years stayed at a relatively high level of around 95 000 units, reflecting a stable supply in the private market.
Taking into account the various factors as aforementioned, we consider that the current development of the local property market is an orderly adjustment and do not see the need to adjust the relevant management measures at the moment. If the demand-side management measures are abolished hastily without suitable conditions, such move could be subject to market speculation and may stimulate demand for, and even short-term speculation of, local residential properties by some persons.
With regard to the stamp duty concerning redevelopment projects, currently, a developer may apply for a refund of BSD and a partial refund of the ad valorem stamp duty paid (the amount being the difference between stamp duties computed at the NRSD rate and the Scale 2 rate) after the developer has become the owner of the entire lot to be redeveloped, and has met one of the following conditions: (a) having obtained the consent to commence any foundation work for the lot from the Building Authority (BA) under the Buildings Ordinance (Cap. 123); or (b) having demolished or caused to be demolished all buildings existing on the lot, and obtained BA's approval in respect of the plans and details of the building works on the lot. This refund mechanism encourages developers to take forward and implement the relevant redevelopment projects as early as possible. We have no intention to adjust the relevant arrangement at the moment.
As always, the Government will continue to closely monitor the residential property market situation, and take appropriate measures as and when necessary in response to market changes with reference to relevant indicators.
Thank you President.
Ends/Wednesday, January 11, 2023
Issued at HKT 16:35
Issued at HKT 16:35