Hong Kong seen resuming subsidised housing this week

HONG KONG: Hong Kong Chief Executive Donald Tsang is expected to announce the resumption of building subsidised housing for sale in his final policy speech on Wednesday, Oct 12, in order to soothe public discontent about the city's sky-high property prices.

Tsang, who is going to step down next year after two terms of office, is likely to propose the construction of 5,000 flats per annum under the so-called Home Ownership Scheme (HOS) to provide affordable homes to eligible applicants, analysts and local media said on Monday.

"The expected resumption of the scheme is aimed at addressing public concerns about high property prices," said Conita Hung, Head of Equity Markets of Delta Asia Financial Group.

HOS is a government subsidised housing programme to give low-income residents a chance to purchase flats at a sharp discount to the market price.

Hong Kong's apartments are the most expensive in the world. Home prices have risen more than 12 percent this year, surpassing records in 1997 amid a low interest-rate environment, strong economic growth and buying by mainland Chinese investors.

But transactions have slowed since June, when the government lowered the loan-to-value (LTV) ratio for home mortgages to cool the red-hot property market. The LTV is the percentage of a property's value that is mortgaged.

Some investors are staying on the sidelines, awaiting further possible cooling measures.

Tsang wrote on Facebook on Sunday that in his policy speech he would announce short-term relief measures and longer-term policies to address the housing issue. But he gave no details.

Hong Kong suspended the construction and sales of HOS flats in November 2002, following a broad slide in the local property market amid a global economic downturn. In 2007, it resumed the sale of HOS flats that had been built but not sold.

Analysts said an annual supply of 5,000 units under HOS would not be enough to move the local property market; the first batch of supply would not hit the market until 2015.

"It should not have any material impact also because the HOS will not be implemented any time soon," said Adrian Ngan, head of Greater China property for brokerage MF Global. — Reuters