Hong Kong’s property prices have been surging non-stop over the last few years. The new government has listed the housing problem as the most critical of all and released the so-called “cooling measures”. The housing turnover dropped all of a sudden. However, after the Policy Address was announced, the property market seems to be ready to cause trouble again as there are no more short-term measures. Many believe that the government’s measures do not hit the core of the problem.
Rome wasn’t built in a day. The reason why the property prices keep increasing is because there is an imbalance between supply and demand. For the past five years in the private market, there are only 9,800 new flats available each year. However, from past experiences, there should be at least 20,000 new flats every year to satisfy the basic demand of the market. On top of that, Mainlanders have been coming to purchase properties in Hong Kong in the recent years; thus the actual demand increases immensely. Under this situation, it is not surprising that the property prices keep surging.
There is a story behind the shortage of properties. After the Asian financial crisis in 1997, Hong Kong’s property market plunged. In an effort to stabilize the property market, the government stopped regular land auctions in 2002, and subsequently adopted an application list system for land sales. The land supply has greatly reduced ever since. The government has been reluctant to resume regular land auctions, resulting in the torments in the past few years. I am not mentioning this history again to put the blame on somebody. I just want everyone to know that the plight we are in now is a result accumulated from the past ten years. There have been shortages in land supply over the past decade; the development of land by the government is in a semi-still state. We are going to need a magician if we want this problem solved overnight.
In fact, the Policy Address has brought up land supply policies for short, medium and long-term, making use of every inch of land. I have never seen a Policy Address that has such a detailed report on land supply. However, to develop buildings on empty land takes at least four to five years. Fortunately, the Policy Address has made reference to short-term housing supply. In the next three to four years, the private market will supply 67,000 new flats, which means there are at least 16,000 new flats each year. Compared to the annual supply of 9,800 new units before, there is already an increase in supply. The tensions shall be relieved when the Home Ownership Scheme flats will be completed in the next few years and with the cooling measures, which will effectively reduce the number of Mainlanders purchasing properties in Hong Kong.
The Policy Address unveiled a number of measures to increase land supply, including changing the use of some Government sites, deserted Green Belt areas and industrial land to housing development. All these will provide more than 300 hectares of land for housing development in the next few years to balance out the demand of the market. I think that increasing the land supply is the most fitting solution to this problem.
What I worry about the most is not the government being unable to find land, but about the government having to face the pressure from society and subsequently come up with further short-term measures to curb soaring home prices. Currently, the government has already introduced the so-called cooling measures – Buyer’s Stamp Duty and Special Stamp Duty. If the property market still surges in the near future, the government has already stated that they will possibly introduce more cooling measures. Recently many talked about the property vacancy tax. The latest cooling strategy definitely has reduced the number of Mainlanders purchasing Hong Kong properties for the time being. However if the government introduces more measures to further curb the property market, they might become the catalyst of the property market collapsing, should there be turmoil from the outside. For example, the relationship between China and Japan further complicates, the US increases taxes earlier or the European debt crisis worsens.
In my opinion, the current market already suggests that a bubble is forming that can burst at any time. The government’s responsibility is to remind everyone the danger of bubble burst and about how to respond afterwards; their responsibility is not to collapse the market themselves. I do not wish to hear about further cooling measures from the government, as it would only make the situation even riskier. What I wish to see is for the property market to wind down when the land supply is back on track again.
This year’s Policy Address has many long-term suggestions for increasing the land supply, for instance, reclamation, developing Hung Shui Kiu and Lantau Island. I have always supported reclamations outside Victoria Harbour. This time, the government suggested developing man-made islands between Lantau Island and Hong Kong Island. This is an effective proposal which also has the least impact on the environment; it is worth it for us to further look into it. In fact, many coastal cities or countries use reclamation to match with their economic advancement and population growth. Take Singapore as an example, its reclamation land consists of over 13,000 hectares, which is 26% of its total area. As for Macau, two thirds of their land comes from reclamation. Comparatively, Hong Kong only has 6,800 hectares of reclamation land, which is just 6% of the total area. At present, Hong Kong’s overall development is indeed affected by the shortage of land supply; I hope everyone can give some thought on the government’s reclamation proposal.
Lastly, I would like to talk about public housing. Many studies have pointed out that when citizens have a roof over their heads, the society automatically stabilizes and the poverty issue will consequently improve. Singapore is a successful example. Presently, nearly 50% of Hong Kong’s population lives in public housing and subsidized housing. I propose to gradually elevate the proportion of the population living in public housing to 60% or above with public housing as the main accommodation. The Policy Address promised to review the progress of public housing development as soon as possible and proposed in five years from 2018 onwards, public housing supply will reach 100,000 flats. I agree that this is the correct first step. I hope various sectors can also support this, which will help those in need to find accommodation and solve the housing difficulties in Hong Kong.