Hong Kong property prices may spur fresh measures

HONG KONG: Financial Secretary John Tsang Chun-wah warned last Friday that new measures would be rolled out to cool property prices if steps he introduced in the budget did not do the job.

The budget has been heavily criticised by lawmakers and members of the public for failing to address the difficulties many people face in buying a home.

The government last Thursday said it would sell six sites for luxury housing in the coming two years if developers did not make bids sufficiently high to trigger auctions for them under the application list system. Last Friday, Tsang said the supply of sites for small and medium-sized flats would also be increased to rein in property prices.

"I hope we can give the market a very clear message: we are determined to see a stable and healthy growth in Hong Kong's property market," he said.

"If we find out this cannot be achieved because of a certain situation in the market, we will roll out new measures."

While he did not elaborate, observers said measures put forward in the 1990s to stop property prices rising, which were subsequently relaxed or dropped when prices slumped, could be reintroduced -- perhaps in a modified form -- to address fears of a property bubble.

These could include giving developers consent to pre-sell flats closer to the estimated date for completion, and banning the resale of uncompleted flats to stop excessive speculation in the new-home market.

The government has also tried previously to dampen speculation by raising the minimum initial deposit on new flats from 5% to 10% of the purchase price and allowing each buyer to purchase only one flat and two parking spaces in the same development.

Tsang said that over the past year, property prices had risen by up to 27%, which he called exceptional.

In his budget, he announced four measures to curb the rise in property prices. He raised stamp duty on transactions over HK$20 million (RM8.73 million), ordered the sale of sites on the land application list if they are not triggered for auction in the next two years, and said steps would be considered to stimulate the secondary market for Home Ownership Scheme flats. Monitoring of speculators' activities would also be tightened.

Urban Renewal Authority chairman Barry Cheung Chun-yuen also said the authority would release about 1,000 flats on the market over the next two years, of which 60% would be small to medium-sized flats of less than 600 sq ft.

But Tsang's measures were criticised as being of little use to aspiring first-home buyers from the grass roots and middle class, because they were likely only to affect the prices of luxury properties.

Speaking on RTHK, Tsang said although the government knew of the difficulties facing homebuyers, it could not introduce measures, which would lead to large fluctuations in prices because that would affect people who already owned flats.

He maintained that his budget had achieved the right balance.

Hitting back at criticisms that the budget's HK$20.4 billion worth of relief measures did little for the underprivileged, Tsang said people should "get away" from the idea they were entitled to sweeteners, especially when the financial crisis had passed. "I hope people won't get used to them because these are extraordinary measures in extraordinary times," he said. "In my budget I have mentioned many times that we have to return to the basics and let the economy do its work."

The people the government aimed to help were those who had not benefited from the economic recovery, he said, adding that the government had already devoted 60% of expenditure to social services, health care and education. – South China Morning Post