HongKong Business

Analyst: New tightening moves fail to cool down housing market

By Li Tao (HK Edition)
Updated: 2010-08-18 07:27

The government is not taking the right steps to cool the city's soaring home prices, says Joseph Tang, head of capital markets at Jones Lang LaSalle.

"The Hong Kong government is trying hard to do its job but it is also missing the point," said Tsang during an interview with China Daily. "It fails to release proper land resources to boost supply and fails to tell where speculative activities really exist - that explains why tightening measures have failed to bring about concrete results in the last few months."

The government announced last Friday a series of new initiatives to curb soaring home prices including boosting the land supply and restraining speculative activities by raising transaction costs. Those measures followed a series of other measures announced earlier this year.

In the meantime, home prices have soared more than 40 percent since the beginning of 2009. Prices of some luxury apartments have surpassed record highs set in 1997.

In its latest move, the government banned the resale of first-hand uncompleted flats before the initial transactions are completed. New rules also require buyers of those flats to forfeit 10 percent, instead of the current 5 percent, of the total purchase price if they cancel the transaction.

The government will also put up for sale three additional residential sites later this year in a bid to boost the land supply.

But the newly-announced measures do not appear to have done much to cool down the red-hot real estate market. Developer's responded strongly to Tuesday's land auction, during which two development sites were sold for higher-than-expected prices.

The high winning prices indicate that the government's land sales are adding steam to the red-hot property market rather than cooling it down, Tsang said.

Boosting the land supply is one way to meet the growing need for affordable housing, but selling expensive plots effectively keeps most of the population out of the running for new flats.

"What most home buyers in Hong Kong could afford is small or medium-sized apartments, not those on the Peak or other prestigious areas where the supply is limited and prices are sky-high for them. Why doesn't the government sell more plots in the New Territories, which could provide two or three thousand apartments to ordinary residents, to meet the real need of those aspiring homeowners?" Tsang said.

Tsang said the new measure that requires a higher down payment for luxury homes valued HK$12 million, or above, also "missed the target."

He said real speculators in Hong Kong's property markets are always individuals with abundant cash on hands or buyers that operate through companies. Most importantly, most speculators favor properties valued HK$5 million or below.

"The government has an easy way to curb speculation in the market - by collecting capital gain tax as the mainland does, and by imposing fines on owners who resell their property within a certain period after the purchase. This is the most effective way that won't hurt those real home buyers, but adds costs to speculative activities in the market," Tsang said.

China Daily

(HK Edition 08/18/2010 page4)