HK Policy Address 2014 on HousingIn the introduction to his January 15 annual Policy Address, Chief Executive CY Leung outlined a list of things his administration achieved since the last PA — introducing an official poverty line, plans for clean air and sustainable use of resources, a zero delivery quota for pregnant Mainland women, and of course the buyer’s stamp duty. Amid more steering committees and commissioned studies, Leung addressed the housing issue, stating, “The Government is doing its utmost to increase land and housing supply in the short, medium and long terms. We have implemented measures to manage demand and effectively curbed rising property prices. Meanwhile, we are formulating a long-term housing strategy for the first time in 15 years.” So what’s the scuttlebutt?

“The Policy Address has set a right direction for outlining development blueprints,” began Knight Frank’s Executive Director Alnwick Chan in a statement reacting to the PA, citing infrastructure maximisation, tourism benefits and stronger links to Shenzhen, while stressing a need for doing all this sustainably.

Supply in Demand
“The government has failed to achieve its short-term housing supply target,” stated Colliers International bluntly in its response. “In this year’s Policy Address, Leung has lowered the primary residential supply target to approxinmately 13,600 flats per annum over the next five years, from an average of 16,750 flats,” the year before, leaving the housing crunch front and centre. Increasing land supply figured prominently in the PA, and this year’s solutions included identifying 80 Green Belt and Government, Institution or Community sites (on top of an existing 150) for rezoning, which could accommodate 89,000 homes. Great news, but some of these locations may require land resumption, clearance or relocation of existing or planned facilities. “We are taking steps to rezone for residential use sites in Green Belt areas, which are devegetated, deserted or formed, as well as suitable industrial sites. The PlanD has commenced a new round of industrial land review, which is expected to be completed in 2014,” Leung promised.

The housing committee set a goal of supplying 470,000 new units in 10 years — 60 percent of that public housing. “To achieve this target, we have to ensure that there will be adequate supply of land, funding for the Housing Authority and manpower resources in the construction sector. This will be a tall order for both the Government and the community.” Ya think?

Jones Lang LaSalle was cautious in its reaction in light of impact. With private homes still in shortfall, “The Government’s aims at ramping up public housing at the same time may potentially dampen demand and prices in the private market as buyers in the lower end of the market opt to buy/rent public housing instead.” Not surprisingly, the WWF read between the lines and wasn’t overly thrilled with what it found. “In view of the numerous reclamation and land supply proposals announced, WWF demands that first and foremost, a holistic Strategic Environmental Assessment be performed to evaluate how these development projects will cumulatively impact on Hong Kong’s environment,” it said.

New Frontiers
Ideas that did score points for Leung was the Lands Department’s continued new framework for land premiums. “The Government will … introduce a Pilot Scheme for Arbitration on Land Premium to facilitate early agreement on land premium payable by way of arbitration.” Another was the focus on the New Territories for answers. “The North East New Territories New Development Areas (NDAs) project is essential to Hong Kong’s medium and long-term land supply and will become the major source of housing supply from 2022 onwards,” said Leung. The government has already kicked the area into high gear, promising 60,000 units in the near future (60 percent PRH and HOS residences). Further to that, Hung Shui Kiu (near Yuen Long) has hit the development radar, and could potentially be home to 175,000.

“Hong Kong’s housing supply shortage has a profound impact on our society. We welcome the Government’s positive response to the issue … The development of the Northeast New Territories shows a high degree of flexibility, and we believe with this comes valuable opportunities to develop multiple new towns,” said Dr Daniel Ho, president of RICS Hong Kong. In RICS’ eyes, business development and housing policy go hand-in-hand, and hopes for the holistic growth of both.

Knight Frank was impressed with the arbitration plans. “The independent third party arbitration mechanism will facilitate the land premium negotiation process between developers and the government and will increase the level of independence and fairness of the land premium process,” said Chan.

Ultimately, JLL saw no significant changes in housing policy that were likely to cause major waves, since the short/medium-term land supply solutions are years away from realisation and won’t solve the immediate problem. Craig Shute, senior managing director for CBRE Hong Kong, Macau and Taiwan noted the conspicuous absence of new cooling measures was a positive sign for the market. Overall, “The lack of additional government intervention is welcome as market participants have one less variable to factor into their housing decision,” he said, admitting the relaxation of the current measures is unlikely. Colliers agreed, predicting another 18 months of measures in light of unattainable targets. “It is essential for the government to closely monitor the supply target. An adequate supply will eventually moderate the property price to a more acceptable level, with the ultimate goal to develop a more stable housing market.”