Last Dance

Last DanceChief executive Donald Tsang’s last policy address delivers a message for home-seekers, but is it enough?

The day has come. Finally.

Hong Kong’s chief rolled out his final Policy Address and it contained a series of housing measures to curb soaring home prices, a pressing issue that has threatened his legacy and the livelihood of many.

What came under spotlight is the revival of the defunct Home Ownership Scheme (HOS), a subsidised housing programme shelved in 2003. Most believe chief executive Donald Tsang, who as a former financial chief called a halt to the HOS, is much to blame for the skyrocketing home prices. Since he took office in 2005, prices have risen a whopping 80.5 percent, according to Centaline Property’s Centra-City Leading Index, which keeps track of local property prices.

Delivered against a backdrop of global economic uncertainty the policy is being regarded by some as a sweetener, or simply a bow to pressure from Beijing to alleviate grievances stemming from housing needs. Over 17,000 flats will hit the market starting in 2016 to help first-time home buyers in the key sandwich class earning under HK$30,000 to gain a foothold on the housing ladder.

While all eyes are now on the private sector and the impact of an HOS re-launch on it, experts expect the impact to be minimal, at least in the short term. One reason is the first batch of only 2,500 HOS flats — mostly small and mediumsized units in the New Territories — won’t be released for four years and the government reserves the right to call a halt to the scheme. “We don’t expect a big punch on the private market as supply is relatively small and flexible,” said Ricky Poon, executive director of residential sales with Colliers International.

“The impact is at most on small flats, but never on urban luxury housing or bigger flats with three bedrooms or above. They are in a different market after all,” added Buggle Lau, chief analyst with Midland Holdings. However he warned consumers should, “Be ready to see a drop in sales in the second-hand HOS housing [sector] as many will flock to buy the new HOS flats.”

A key change was also made on resale restrictions. HOS owners may sell their flats on the open market after paying a land premium — now unadjusted to market changes — even in times of a property boom. “The prime purpose is to enliven the HOS secondary market, thus facilitating HOS flat owners to turn to the private sector after five years,” said Simon Lo, research and advisory executive director also at Colliers International. Some fear taxpayers’ money is being used to fund speculative activities. The new premium policy is a de facto loan from the government to finance home purchases, theorised economist Raymond So Wai-man, dean of the business school at Hang Seng Management College. “Being allocated a HOS flat is as lucky as winning the lottery … It is a sure chance to profit.”

Resuming HOS supply is just one way to heal. The government understands this too, and also realises ensuring steady housing supply is the key. Under the existing application list system selling government lands, developers — not the government — enjoy great autonomy over the supply of private flats. To meet the annual target of providing 40,000 flats in the private market, the government is now determined to build up its land reserve by whatever means, from reclamation to utilising rock caverns, from converting greenbelts to rezoning industrial and agricultural land into housing sites.

“This is one of the best in the Policy Address,” said Midland’s Lau. “With ammunition in hand, the government can release land supply in times of shortage to suppress high home prices.” So welcomes such a move, saying that, “The development of [a] land bank is a policy with long-term vision.” Yet the market looks forward to a more transparent application list system. “All we hope for is a stable market favourable to buyers. The government should reveal its land reserve and timetable for land sale to boost market confidence,” Lau added.

What’s more, building a second Central in East Kowloon is now on the agenda. The government will take the lead to relocate its offices to the site of former Kai Tak Airport and release sites for commercial development. With grade A office space in Kwun Tong and Kowloon Bay surging 2.5 times in recent years, the city’s chief believes it’s time for a more ambitious move. Up to 400 hectares of land in Kai Tak, Kowloon Bay and Kwun Tong will be turned to commercial offices, serviced by a $12 billion monorail to improve accessibility.

“This isn’t a bad idea at all,” Lau said. “There’s nowhere to squeeze in new buildings in Central and reclamation is out of question.” But some are less optimistic. “It all depends on whether businesses will buy this gimmick.” Poon added. “Headquarters of investment banks and the big fours are unlikely to move away from Central, except their back offices and some start-up enterprises.”

Some see the swansong Policy Address a package of one-off giveaways, far too little too late, while others accept it as a direct response to public demands. How the policies fare is a game of wait and see now — or simply wait if you’re one of hundreds and thousands of aspiring HOS buyers. But as So put it, “Housing polices can bring some relief to problems … but you can never solve them all, and the government will always be busy with [new] housing policies.”