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Deconstructing The 2015 Policy Address

Deconstructing The 2015 Policy AddressThe More Things Change…
CY Leung’s annual policy address made lots of promises but fell short of action

On January 14, embattle Chief Executive CY Leung delivered the annual policy address, and to no one’s real surprise, he didn’t say all that much. After a detailed explanation of why Hongkongers will be — and always have been — subject to others’ approval for their potential elected officials, Leung laid out the year’s plans for managing the economy, providing for the disadvantaged, educating future generations, protecting the environment and, of course, finding someplace for us all to live.

Laying the Groundwork
Property, housing, prices and land availability are only a few parts of the Policy Address but they are the ones most of us listen to. For all the points in the Housing, Land and Transport section — 48 to be exact — Leung made no solid promises and, according to Colliers International, simply set unattainable goals. The big news? A housing supply target of a lofty 480,000 public and private (40 percent) units in the next decade. The government’s projection as of December 2014 was for approximately 74,000 private flats in the next three to four years — the highest supply on record (debatable) and just shy of 15,000 for the next five, up from an average of 11,400 over the last five. However, “The new supply target, at 20,000 private flats per annum, is 29 percent below the average supply per annum between 1980 and 2004. With home prices soaring last year, the market is urging the government to provide a more comprehensive land-supply timeline to stabilise the market,” said Colliers in a statement.

But lest we forget, “The root of many social and economic problems in Hong Kong lies in the shortage of land for development,” said the PA, which pledged a boatload of studies and committees. Among them: to investigate land use at Lam Tei Quarry, transport links from East Lantau, feasibility of Yuen Long South and Fanling/Sheung Shui, reuse of brownfield sites, Lung Kwu Tan reclamation, underground development and artificial island development off Lantau among others. But studies do not translate into results, and the government focused largely on public housing. The Housing Authority aims to supply roughly 6,300 units for pre-sale between now and 2017 (including HOS and HKHS properties), accounting for 15 percent of the total for sale. To that, Jones Lang LaSalle noted, “In 2014, transactions in the HOS secondary market accounted for less than 5 percent of all residential sales. Given that subsidised flats account for such a small slice of the overall market, we expect the immediate future supply of such units to have limited impact on the private housing market.”

Of this year’s PA Colliers’ Manager of Research & Advisory Joanne Lee continued, “It’s the same thing as previous years. The focus is always on increasing housing supply, on increasing land supply. But the government finds it difficult to secure land to meet supply. So is it realistic? You need the land and they’re facing a lot of obstacles. In the short term I don’t think this supply target can be met. The earliest available actual supply is 2019.”

Landfall
As Leung stated, a lack of developable land is the key issue. So where all this space is coming from is anybody’s guess. Some of those guesses have been the country parks — which Leung blamed for leading to the current land shortage: “A substantial amount of land was zoned for non-development uses such as country parks to improve the environment.” Shame that. For now, plans include a review of Kai Tak residential development (providing at least 6,800 units), the old Diamond Hill Squatter area (Tai Hom Village), the former Cha Kwo Ling Kaolin Mine and the former Lamma Quarry (for 8,000 units). On top of that, reclamation outside Victoria Harbour will feature prominently in long-term land supply if the government has anything to say about it. “The cumulative environmental impact assessment of the western Hong Kong waters is largely completed. Taking the assessment findings into account, the Government plans to commence a planning and engineering study on the Lung Kwu Tan reclamation at Tuen Mun in 2015.” Also barrelling full steam ahead: the development of Tung Chung East and Lantau.

“Tung Chung will become an important transportation hub to Mainland China, and this supports the government’s intention to develop North West New Territories with huge potential in the future,” said Thomas Lam, senior director and head of valuation and consultancy, Greater China at Knight Frank. “In fact, the government should speed up the development in Lantau Island so that it serves as an important source of long-term land supply in Hong Kong.” CBRE agreed. “The concept of an East Lantau Metropolis … was first introduced in last year’s Policy Address to pave the way for a third CBD for Hong Kong after Central and Kowloon East. Without a solid timeline, the government must hope to start the preliminary study as soon as possible,” theorised Marcos Chan, head of research at CBRE Hong Kong, Macau and Taiwan. “If the new reclamation for the East Lantau Metropolis is blended with the proposed extension of Tung Chung New Town and other infrastructure developments planned connect Lantau with Hong Kong Island and the New Territories, it will form a very strategic hub for Hong Kong.”

Not everyone likes the idea. The waters around Lantau have been a battleground since the construction of the bridge commenced, and the WWF for one doesn’t like the PA’s lack of environmental direction. The mega-projects planned for the area are destructive to both ecology and fishermen, and the government has not laid out any ideas for sustainable development. It also accuses Leung of failing to fulfil his conservation pledges. “Both development and conservation in Lantau waters are now a mess. On one hand, the government claims that they are carrying out various conservation measures, yet on the other, the CE just suggested numerous mega-infrastructure projects,” stated Assistant Conservation Manager, Marine for WWF-Hong Kong Samantha Lee in its response. “A lack of planning on how we use the sea will undoubtedly lead to conflict between conservation and development.” WWF isn’t keen on Leung’s view of the country parks as wasted space either, and suggested the focus remain on brownfield sites rather than precious greenbelts.

So for now, it’s steady as she goes, no matter she’s going nowhere. With just 9,000 units completed in 2013, things can’t get much worse. Whether or not Hong Kong is turning into a powder keg no one will say, but housing has become a political hot potato and it will be every CE’s problem for the foreseeable future.