HONG KONG: Property analysts called on the government to release new measures to cool the overheated property market, because Financial Secretary John Tsang Chun-wah's budget failed to address the problem, they said.
The calls come after property prices show signs of a strong rebound from a brief slowdown at the end of last year when the government introduced extra stamp duties and tighter mortgage conditions.
According to Centaline's Centra-City Leading Mass property index, average prices in the 86 major estates it monitors have grown 7.28% this year. The index monitors price trends in mass residential estates.
The market had expected Tsang to unveil a series of cooling measures in his Feb 23 budget, such as resuming regular land auctions, and took a pause as it awaited the measures. However, when they did not materialise, demand and prices resumed their strong upward trend, analysts said.
Centaline founder Shih Wing-ching said he had suggested the government should resume the construction of Home Ownership Scheme flats in 2004 to avoid further sharp rises in prices. Until now the advice had not been taken up and prices continued to rise, he said.
Shih also believed the extra stamp duty levy would work only to keep local investors away from the market and none of the government's measures addressed the supply and demand problem in the market. "People have misunderstood the market. They thought the sharp increase in prices over the last few years was triggered by investors," he said. "In fact, it is because the user-buyers of Hong Kong residential properties are no longer limited to local people, but come from all over China."
In addition, China's crackdown on the purchase of second or third homes would encourage China buyers to buy property in Hong Kong instead, he said. Under this situation, the government should not aim to reduce property prices in the local market because this would only help foreign investors to buy properties at cheaper prices.
Instead, he said, the government should allocate some sites for the development of homes for first-time buyers to satisfy their demand.
"The flats could be restricted for sale to first-time buyers who could only resell to other first-time buyers afterwards. The government does not need to offer the homes at a discount," he said.
The government should also take back control of land supply by resuming regular land auctions because an increase in land supply could help cool prices. "They can't rely on the system of the land application list, which lets developers control land supply," he said.
Also, the government should require developers to build green facilities such as a system to collect and recycle rainwater and solar systems in luxury residential projects. "This will increase developers' construction costs, and will keep them from bidding at aggressive prices for luxury residential sites," he said.
However, Professional Property Services chairman Nicholas Brooke believed Tsang had done all he could.
"Although the shortages of supply and the knock-on effect in relation to affordability should have been foreseen several years ago, the financial secretary did all he could to send the right signals by augmenting supply and introducing a programme of auctions and tenders without pushing the market over the edge and into correction mode," he said.
He warned that the risks of pursuing an overly aggressive programme to cool the market were real and should not be underestimated.
"On the demand side... the financial secretary can do little to tame demand, given excess liquidity and low interest rates, and will chose, I believe, to leave interest rate increases towards the end of 2011 and into 2012 to calm the market," Brooke said.
Tsang could still increase the number of auctions or tenders later in the year if developers failed to respond through the land application list, he said. But the government would always have in the back of its mind the 1.2 million families who owned their homes, which were probably their largest investment.
Property expert Trevor Cheung said the government should have released measures three years ago. "Now all we can do is to wait for the market to correct itself," he said.
In the meantime, the government could only send signals to warn the public of the risks in the market. — SCMP
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