Prospective home buyers have been cautioned against being lured by present low interest rates to rush into the housing market.

"The present interest rate is ultra low but this cannot last for a long time," said Secretary for Transport and Housing Eva Cheng Thursday. "People must therefore do a strain test by asking themselves if they can continue with the mortgage payment in case of interest rate increase," she said.

Cheng, who was attending an exhibition of flats available on the secondary market, underscored the government's position to maintains stable land base, yielding an adequate supply of new housing. Beyond that, she said, home purchases are individual decisions.

"The government does not advocate that people buy properties. It is a personal decision and it is very important for them to buy in line with their affordability," she said.

She said that in the next few years, about 61,000 new residential units, most of them small and medium flats, will be available in the market. Cheng went on to say that the government no longer maintains a target that 70 percent of the people own their own properties.

"There are still quite a number of secondary flats that are suitable for first-time home buyers and they must not be scared by flats that cost HK$15,000 per square foot."

The aim of the exhibition is to provide information about available units priced between HK$1 million to HK$2.5 million in various districts of Hong Kong. It also provides related information such as legal advice, calculation of mortgage payments, mortgage insurance and applications for mortgages.

Speaking at a seminar that followed the exhibition, Undersecretary for Transport and Housing Yau Shining-mu said the "My Home Purchase Plan" unveiled during the 2010 Policy Address aims to help the sandwich class who have the financial viability in the long run by helping them to meet the down payment.

Although the plan provides only 5,000 flats with the first 1,000 flats not to be available until 2014, he said the government would add extra resources if the flats are embraced by home buyers.

The plan offers an option for the citizens to buy the property after renting them for up to five years, plus a further cooling period of two years. "This provides a seven-year period for people to decide buying or not buying," he said. "Such buffer prevents people from buying while market is at the peak and then regretting their buying decision."

The Undersecretary for Transport and Housing added what the government wants to see is a stable, healthy property market. Given that there are around 1.2 million home owners in Hong Kong and many of them have not completed the mortgage payments, an unstable property market will affect local economy and this class of people very seriously.

At the seminar, Lawrence Poon, chairman of the Housing Policy Panel of the Institute of chartered Surveyors in Hong Kong, said about 70 percent of the units in the market are small and medium units, with an area of 500 to 600 square feet and no frills. They are priced below HK$3 million and are suitable for first-time home buyers.

Lawmaker Jeffrey Lam from Economic Synergy that organized the event, called on the government to raise the ceiling on housing mortgages from 90 percent to 95 percent for flats priced below HK$2.5 million. He argued the price of flats of this type is less prone to fluctuation.

China Daily

(HK Edition 10/22/2010 page1)