Straits Times: Fri, Aug 31
HONG KONG - A controversial proposal to bar foreigners from buying some private-sector homes in Hong Kong, the world's freest economy, is going ahead, with the government in the process of hammering out the details.
Together with 150,000 housing units that will enter the market over the next five years, the measure is likely to stabilise soaring housing prices in Hong Kong - which last week saw Asia's most expensive apartment sold for HK$470 million (S$76 million). The city built 18,000 flats last year.
Chief Executive Leung Chun Ying, whose popularity is at a low as his rivals snipe that he has not fulfilled his promise to alleviate the housing shortage since taking office two months ago, yesterday made the announcement himself.
Flanked by his housing and development secretaries, Mr Leung said that runaway housing prices in Hong Kong have far outstripped income growth.
"The problem is acute," he said at the briefing. "As a main land supplier and developer, the government has the responsibility to solve it."
The announcement resulted in the biggest fall in Hong Kong property stocks since May.
Mr Leung had previously made the promise that he would look at allocating land sites for residential units solely for locals.
It is a popular idea which, unusually, united parties across the political spectrum in their support.
Mainland buyers account for 40 per cent of luxury home transactions, though just 10 per cent of overall sales. They have been blamed for pushing up home prices, which have jumped 85 per cent since the beginning of 2009.
But the policy met with lukewarm reception from analysts, with one calling it "poison to the market".
Dr Edward Liu, a real estate academic from Hong Kong University, told The Straits Times that troublesome kinks needed to be ironed out.
He asked, for instance, if owners of such flats should be allowed to resell them freely - including to foreigners.
Two of Mr Leung's advisers have also separately said the policy needed to be treated with caution.
Mr Leung yesterday gave few details on how it would pan out.
He said only that his government has started drafting the legal framework, and that the restriction on foreigners may be incorporated into land sales agreements. He added that the measures will be implemented "when necessary".
Of the 150,000 flats coming on stream, 75,000 are public flats that will be ready in five years and 65,000 are private flats to be released in three to four years.
These are a result of speeding up approval of permits for private project sales and selling public units originally intended for rental.
A remaining 11,900 units will be released by converting 36 government land sites - such as those for public amenities - into residential use. But this will take time, and requires the support of local councillors and communities.
Together, they will "help to address the undersupply but not totally fill the gap", said Ms Eva Lee, head of Hong Kong/China property research at UBS bank.
She estimates that from 2003 to 2009, there was an undersupply of 5,000 private homes every year. This comes to about 30,000 units.
Coupled with projected new demand for 25,000 homes both public and private a year, about 155,000 units will be required by 2017.
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