Soaring property prices fuel talk of sale restrictions

HONG KONG: As property prices keep rising, debate is heating up on whether restrictions should be imposed on outside investors buying flats in Hong Kong.

Research shows more than a third of new luxury apartments sold in the first half of the year were bought by the Chinese — up from about a fifth last year.

Measures such as raising the investment threshold for immigrants or allowing only Hong Kong permanent residents to buy small and medium-sized flats have been suggested as the city wrestles with the conflicting principles of a free market and the need for affordable homes.

The figures indicate China buyers have pumped more than HK$12 billion (RM4.84 billion) into the overheated market so far this year.

"This is critical," said Chau Kwong-wing, chair professor of the department of real estate and construction at the University of Hong Kong. "The transactions of China investors have already accounted for a substantial proportion of flat sales. It will be difficult for the government to request developers to provide cheaper flats when selling luxurious flats is such a lucrative business."

Records received by the Land Registry from January to June show that China buyers accounted for at least 35% of 1,012 new flats sold for more than HK$12 million, accounting for HK$8 billion in all. This is up from 22.6% of 1,684 transactions in the second half of last year.

The number stayed around a fifth or less in the previous three years.

the Chinese are also buying a bigger proportion of cheaper properties, accounting for 13% of 5,618 new flats sold for less than HK$12 million in the first half, spending about HK$4.8 billion. In the same period last year, they bought less than a tenth of such flats.

The statistics, compiled by Centaline Property Agency last month, are regarded as conservative, as they do not cover company buyers or sales of subsidised flats. Also, only buyers with their names written in pinyin are identified as China buyers.

Fuelling the debate is the conflict between people seeking to buy flats, who naturally want lower prices, and those who already own their homes and want prices to keep rising.

Chau had reservations about banning China investors from buying properties in Hong Kong, but he said excessive China investment in luxury flats would eventually lead to a rise in the price of cheaper flats.

"Smaller flats will become more expensive when developers devote most of their land resources to the luxury market so as to reap profits from China buyers," he said.

Last week, executive councillor Professor Anthony Cheung Bing-leung said the government should consider preventing outside investors from acquiring small to medium-priced flats if measures announced by Financial Secretary John Tsang Chun-wah last week — including a ban on resales of uncompleted flats — fail to curb speculators.

Cheung's view is echoed by similar proposals recently floated by politicians and professionals. Lawmaker Dr Priscilla Leung Mei-fun proposed raising the minimum investment under the Capital Investment Entrant Scheme, allowing people the right to stay in Hong Kong, from HK$6.5 million to HK$10 million.

The chairman of Centaline Property Agency, Shih Wing-ching, suggested requiring developers build small to medium-sized flats that would be made available only to Hong Kong permanent residents.

The Democratic Alliance for the Betterment and Progress of Hong Kong also proposed earlier this week that the government should require developers to build such flats for local families with incomes of less than HK$30,000, who could enjoy a government subsidy accounting for one-fifth of the flat's value.

Chau supported the idea of raising the investment threshold for immigrants. "The measure is not discriminative against the Chinese, and it can prevent them from investing in more affordable flats."

Despite such calls for control, Executive Council convenor Leung Chun-ying questioned the practicability of the proposals. He said he was open to proposals controlling outside investment in local properties, but there were problems in implementing such measures.

"There may not be a timely option to provide affordable housing, as it requires years to amend legislation."

He said Hong Kong did not have a clear definition of citizenship, and controlling outside investment would mean stopping offshore companies from acquiring properties. "How should we define non-resident? Does it cover non-permanent residents? Should we allow foreign companies to acquire flats for their senior staff? These are practical problems we have to solve."

Leung said smaller flats were not necessarily affordable and the Home Ownership Scheme, started in the 1970s but since shelved, was a readily available mechanism to provide affordable housing.

Some cities discourage outside investors from acquiring property. In Australia, foreigners acquiring homes must be approved by the Foreign Investment Review Board, and it is a civil offence for non-residents to buy second-hand flats.

Immigration consultant Eddie Kwan King-hung said applicants migrating to Singapore would be banned from investing in local properties from next year. While foreigners in Singapore are allowed to buy flats in condominium developments, they are restricted from buying the affordable flats built by the Housing Development Board, along with bungalows and terraced and semi-detached houses.

Kwan said banning outside investment in local properties could affect Hong Kong's image as a free economy but he believed it would not reduce the city's attractiveness to immigrants. "Hong Kong still offers a diverse range of permissible investment tools like funds, bonds, stocks and insurance."

Kwan said that annual investment in properties in the Capital Investment Entrant Scheme accounted for only one% of the total value of transactions each year.

Lawmaker Lee Wing-tat of the Democratic Party said imposing a tax on quick resales of second-hand flats would be more effective to stabilise prices than limiting outside investment. Government policy only bans quick resales of uncompleted flats. — South China Morning Post