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Academics and observers hit at property measures

HONG KONG: New measures outlined in the chief executive's policy blueprint will not satisfy people's demand for government help in becoming homeowners and will have no immediate impact on rising property prices, academics and market watchers say.

Share prices of Hong Kong's property companies on Wednesday, Oct 13 recovered after a sharp drop around noon when Donald Tsang Yam-kuen announced the policies aimed at cooling the housing market. Tsang's housing plans — which took up nearly a quarter of the policy address — include increasing land supply by launching a public consultation on the reclamation outside Victoria Harbour to generate more land in the long run. They will also speed internal procedures to make more residential sites available to the market.

"We should address the fundamentals by increasing land supply in response to market demand," Tsang said. "We will create a land reserve, use the application list system as the main axle, supplement it by a government-initiated land-sale arrangement, to ensure there will not be any shortage in housing land supply."

He pledged that, in the next decade, the government would offer enough sites to build an average of 20,000 private flats a year. Meanwhile, from Thursday, applicants for the Capital Investment Entrant Scheme are no longer able to use real estate as an investment category. The government also raised the minimum investment of the scheme from HK$6.5 million (RM2.59 million) to HK$10 million.

Since 2003, when the scheme was launched, 33% — or HK$19 billion — of the total investment under the scheme was injected to the property market. But that has risen to 42% in the first nine months of this year.

Instead of resuming the subsidised Home Ownership Scheme (HOS), Tsang announced a "rent-and-buy" programme called "My Home Purchase Plan" for the sandwich class who are too affluent to get public rental housing but do not have enough savings for a down payment.

Under the new scheme, the government will provide land for the Housing Society to build about 5,000 "no-frills" flats for lease to applicants, individuals and families, at prevailing market rent for up to five years. During that time tenants can buy the flat they are renting or another flat under the plan at its market price, or buy a flat in the private market, within a specified time. Applicants with families need a household income of no more than HK$39,000 a month and assets of no more than HK$600,000. They will receive a subsidy equivalent to half the net rental they paid during the tenancy period, and use it for part of the down payment.

Sites in Tsing Yi, Diamond Hill, Sha Tin, Tai Po, Tuen Mun and other areas have been earmarked for the construction of the 5,000 flats under the plan. The first project, at Tsing Yi, will provide 1,000 flats by 2014.

Tsang admitted that the scheme could not answer the public's immediate need but said land and flat supply would be sufficient in the coming years.

Primary school teacher Brian Cheung, 29, said the policy address did not offer him any immediate help in buying a property. He said it would be a long time before the rent-and-buy scheme started. He hoped the HK$39,000 cap for the scheme could be raised because his earnings, combined with his fiancee's, exceeded it. He said they still found it difficult to buy with government help.

The Real Estate Developer's Association's vice-president Stewart Leung Chi-kin was not worried that the measures would dampen the market. He believed the land supply target of 20,000 units annually would have a positive impact on prices.

Nicholas Brooke, chairman of Professional Property Services, said the policies were medium-term measures that were not going to solve the problems facing society.

He said it was too late for the government to tackle the affordability issue, since it had been building up after the global crisis in 2008. The 5,000 rent-and-buy flats were not enough to solve the problem, he said. "Why can't we sell the sites this year, or next month?" said Brooke. "Home prices will continue to rise."

Professor Chau Kwong-wing, chair professor at the University of Hong Kong's real estate and construction department, said increasing land supply was going in the right direction.

"[Reclamation] is a very controversial issue," he said. "What if the public rejects it? The government should have looked for other possibilities such as by rezoning."

Dr Lau Kwok-yu, associate professor at City University's public and social administration department, was disappointed that the government rejected public calls for the resumption of the HOS. — South China Morning Post
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