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HONG KONG: An admission by Chief Executive Donald Tsang Yam-kuen that the government has made mistakes in the housing market has the industry expecting that Wednesday's policy address will contain radical measures to increase land supply.
"Read between the lines. Tsang has admitted the government has made mistakes which have resulted in today's high home prices," said Koh Keng-shing, head of Landscope Surveyors.
"That implies he will do something to push prices down. Increasing land supply is the solution."
Echoing widespread expectations in the market, Koh said it also was likely that the government would revive the Home Ownership Scheme, which was controversially suspended in 2002.
Housing built under the scheme was sold to eligible low-income earners at discounts of up to 40% on market prices.
Koh said the resumption of such a scheme, together with a long-term master plan on site rezoning, reclamation and land supply, would trigger a fall in private housing prices at least in the short term.
Tsang came under fire for initially continuing the policy of his predecessors and suspending regular land auctions, which left the supply of new sites to the land application list system, by which sites are auctioned only if a developer bids enough to trigger a sale.
The result was a serious undersupply of flats in the market starting in 2009, when property prices began to rise rapidly as Hong Kong recovered from the global financial crisis.
Tsang acknowledged during a radio programme on Saturday that mistakes made by the government in its land and housing policy had fuelled grievances in the community.
Writing on Facebook, Tsang on Sunday said that his address would be longer than usual as it would contain short-term relief measures and longer-term policies to address housing woes. He described the measures as "breaking from tradition", but did not divulge any details.
Chau Kwong-wing, chair professor of the department of real estate and construction at the University of Hong Kong, said the government needed to unveil a clear long-term policy aimed at ensuring an adequate supply of homes in order to contain rising prices driven by a shortage of supply.
"The market will become more stable if the government makes it clear that it has lots of supply available and can release it on the market at any time," Chau said.
"It should ensure that current land reserves are big enough to produce more than 100,000 new units that can meet average demand for five years."
Chau suggested that if the government retained the application list system for the release of new sites, it could set and disclose a reserve price for each site on the list, which would not be adjusted upward in line with a market boom.
"Even if home prices surge, the government should not follow the market by raising the reserve prices. It should raise the reserve prices only in line with inflation. Then more sites will be triggered for sale," he said.
On the other hand, when the market fell, the government would also not cut reserve prices since developers would eventually bid for the sites when they saw supply declining.
Such a policy could help maintain stable prices, he said.
A contrarian view of what to expect from today's policy address was offered by Shih Wing-ching, founder of Centaline Holdings, which controls Centaline Property Agency.
"Don't expect anything radical," advised Shih.
Any change to land policy would involve many complex questions regarding the role of government, he said.
Should the government intervene in the property market or use taxpayers' money to help a particular group of people to become homeowners, for instance?
"I do not believe that Tsang is able to answer all these questions and formulate a long-term housing framework for the next administration to follow before his stint ends in nine months," Shih said. — SCMP
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