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Policy Address impact on 2013 HK Property Market

Policy Address impact on 2013 HK Property MarketJust a few days before Chief Executive Leung Chun-ying’s inaugural Policy Address, Knight Frank released a statement predicting steady residential property prices for 2013, despite the government’s recent actions. “The government’s tightening measures continued to suppress residential sales volume. Luxury residential prices remained stable in December 2012, while mass residential prices increased 1.2 percent,” the news release said. Despite further measures expected in the January 16 Policy Address, Director and Head of Research & Consultancy, Greater China Thomas Lam expected, “Supply to lag behind demand in the short to medium term. Home prices would remain stable in 2013, with only minor corrections.”

So on the big day, what actually happened? The short answer is “Not much.” “The housing measures in the 2013 Policy Address is largely as expected,” comments Ricky Poon, executive director of residential sales at Colliers International Hong Kong. “It addresses a long-term plan on increasing residential new supply, which the impact would be notable and potentially create downward pressure on home prices when the proposed new supplies are actually launched in the market.”

Those plans include increasing total supply to 100,000 units by 2018; getting the Transport and Housing Bureau to expedite public housing construction; ensuring the HKHS builds more subsidised housing; increasing plot ratios; and offering 2,100 new HOS flats next year. Needless to say there’s a lot of consulting, papers, committee establishments and reviewing on the horizon, but Cushman & Wakefield Hong Kong executive director

John Siu thinks there’s some actual meat in the PA. “We feel that [it] provides a very clear picture and road map of the actions to be taken by the government to resolve the shortage problems in Hong Kong. Concrete solutions are clearly set out in the PA with target implementation timelines.”In addition to a concerted effort to address supply across all social strata, the PA ventured back into conversions — chiefly the continued repurposing of industrial buildings. Developers and designers have been turning over the fantasy of residential space for a while now, and it may become reality. If restrictions on conversions are relaxed, “Such arrangements will further facilitate revitalisation of industrial buildings, hence increasing commercial and residential land supply.”Residential? Really?

“Converting industrial lots or buildings to residential uses is one of the most effective means to increase the supply of residential units in the market,” states Siu, adding that the locations of these buildings will demand better product in order to attract purchasers. Cora Yuen, president of the Hong Kong Institute of Housing, agrees. “Such revitalisation is one of the possible and fastest ways to ease the hot plate of increasing demand for housing.” But the conversion of industrial buildings to homes begs the question of whether or not they’ll simply become pricey luxury lofts. RICS Hong Kong Board chair Kenneth Kwan concurs on the speed with which industrial redesignation could alleviate housing demand a bit quicker, adding, “Whether the developers will convert industrial buildings into luxury lofts or other range of housing products will depend on many factors such as the economy, the location of the site, popularity of the district, etc, which RICS expects will be determined by the market.”Heavily industrial districts make superluxury less likely in the immediate term, but the Yuen’s HKIH for one thinks that will come down to management and planning. “The HKIH advocates comprehensive town planning for these industrial areas to be revitalised which should include public transport networks, car parks, medical clinics or centres, schools, recreational facilities and open areas.” That’s also known as years of work.

All this goes back to the city’s perceived land shortage, which according to Leung’s address is stifling development. Hong Kong needs space for housing, elderly homes and socio-cultural venues among others and noted many tracts of undeveloped land reclamation sites remain. Unsurprisingly, that didn’t particularly thrill the WWF. “WWF are extremely concerned about the administration’s aggressive plan to increase land supply by reclaiming 2,000-3,000 hectares of land,” it said in a statement, warning the government needs to be careful of ecologically sensitive areas. Along the same lines, sustainable building has been handed an “inter-departmental steering committee to promote green building.” For many the time for promotion has passed and it’s time for hard action. In the section regarding the environment, there was no subheading dealing with climate change. “The policy address presented a grand vision of a lowcarbon city, but without any clear targets or a roadmap,” said WWF, finishing with, “The government should demonstrate stronger leadership and guide Hong Kong towards becoming a climate change-resilient city.

But Siu is willing to be patient. “Appointing the Secretary for the Environment to lead an interdepartmental steering committee is a strong indication of the government’s determination to promote green buildings,” he notes. “We feel that more detailed implementation policies or incentives will be proposed in a later stage.” As Leung concluded, “Looking forward, my team and I will continue to take on the challenges ahead in a pragmatic and proactive manner.” In other words, let’s just take it slow and see how it goes.