Financial Secretary: Stable land supply is the long-term key

Financial Secretary John Tsang said that the government will take further measures to curb speculative activity in the city's home market if prices rise too high.

"We will ensure that there is a stable supply of land over the long term," John Tsang told lawmakers Thursday during a Legislative Council debate on the Policy Address. "And we will adopt timely measures to reduce risks of a bubble in the property market."

In the annual Policy Address delivered October 13, Chief Executive Donald Tsang put the housing issue center stage by announcing several programs including increasing the availability of land for housing and the supply of affordable homes.

However, a weekly survey released by Ricacorp Properties on Tuesday showed 804 preliminary sale and purchase agreements were signed last week in the secondary market at 50 selected housing estates it monitors, a 33 percent increase on the 606 deals completed a week earlier.

Home prices in Hong Kong have soared 47 percent from the end of 2008, the financial secretary noted. Compared with the previous property bubble in 1997, John Tsang said that the city's medium and small flats are now only 11 percent cheaper while luxury homes are in fact 10 percent more expensive.

"While 840,000 Hong Kong people possess their own properties in the city, we will not carry out initiatives that will cause big fluctuations on home prices," John Tsang said.

Carrie Lam, secretary for development, on the same day told legislators the number of new units supplied annually will not necessarily be capped at 20,000. She was referring to a promise made by the government in the Policy Address that it would make a dedicated effort to construct 20,000 new housing units in each of the next 10 years to boost supply.

Hot money inflow is also another threat to the stability of the city's property market. John Tsang said the government was watching this situation carefully, and will not hesitate to take action.

Nevertheless, Buggle Lau, chief analyst at Midland Realty believes a strong yuan and an inflow of hot money from the mainland may stymie Hong Kong government's effort to rein in the city's home prices, especially in the luxury property market.

"Luxury flats have risen almost 80 percent since 2005, but for buyers from the mainland, the hike is only about 44 percent as the yuan has appreciated more than 20 percent during the period," Lau told reporters at a media briefing Thursday.

Though the city has excluded property transactions from the investment category under the Capital Investment Entrant Scheme, Lau said that for investors, especially those from the mainland, the cheaper Hong Kong dollar is a good deal for investors - whether it brings them a Hong Kong permanent residency or not.

"Since the yuan's appreciation is expected, the Hong Kong property market will continue to be an attractive destination for mainland investors," Lau added.

According to data provided by Centaline Property Agency, mainlanders bought more than a third of new luxury flats worth more than HK$12 million in the first half of this year. In the mass residential market, 13.2 percent of new homes have also been bought by those from the mainland.

China Daily

(HK Edition 10/29/2010 page2)