Donald Tsang

A failure to bring home the bacon

PUBLISHED : Friday, 29 June, 2012, 12:00am
UPDATED : Friday, 29 June, 2012, 12:00am


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Reviewing his seven-year term as the city's chief executive, Donald Tsang Yam-kuen conceded that housing was a major problem and said even he had found it difficult to buy a property in Hong Kong.

While not elaborating on his personal housing problems, Tsang admitted in a radio interview this week that he could have done a better job coming up with an effective housing policy and that the responsibility to do so had been a burden.

Indeed, when Tsang took office in 2005, the property market was still recovering from the 1998 financial turmoil and the outbreak of severe acute respiratory syndrome, or Sars, in 2003. Property prices had slumped, middle-class home owners held negative equity and the proposed but soon aborted '85,000 flats a year ' policy of Tsang's predecessor, Tung Chee-hwa, had pulled down prices even further.

'Bubbles in the property market burst after the financial turmoil in 2000 and prices dropped by 60 per cent. The surgery had to be careful,' Tsang said.

For most of his tenure, Tsang followed the minimalist approach adopted in 2002 by then housing secretary Michael Suen Ming-yeung, who froze most measures for subsidised housing and suspended all land auctions.

No study was conducted to forecast the demand for housing and little effort was made to build up a land bank for future use.

Over the Tsang years this passive approach generated widespread discontent among grass-roots communities.

The anger spurred the term 'property hegemony', which became a popular slogan in demonstrations, with protesters accusing developers of selling homes at exorbitant prices and dominating the economy.

In the public sector, Tsang continued to uphold his pledge to build 15,000 rental flats a year. A policy to redevelop old public estates was replaced with a programme to maintain the blocks as long as they were structurally sound.

Determined to suspend other subsidised housing schemes and faced with the need to generate land revenue, the government turned to the Housing Authority, asking it to surrender land set aside for public housing for redevelopment as private housing and other uses.

A check by the South China Morning Post found that during Tsang's tenure the authority handed over 19 sites, or 19.5 hectares, land that was run-down public housing or old factories. Some of these sites are in prime urban settings and are being sold off to developers to build luxury properties such as North Point Estate, Ho Man Tin Estate and Wong Chuk Hang Estate.

'These sites could have been kept for redeveloping public housing with higher density than before as the waiting list was getting ever longer,' said Wong Kwun, president of the Federation of Public Housing Estates and former member of the Housing Authority. 'I am not saying public housing should occupy all the prime sites, but there should be a balance.'

Assuming a plot ratio of 5.5 is used for redevelopment, these 19 sites could have yielded more than 28,000 public flats of 400 sq ft. Plot ratio defines the total floor area of buildings permitted to be erected on a site and is calculated by dividing the net floor area of all buildings on the site by the net site area. This would have almost doubled the authority's annual target.

Wong said Tsang had also stumbled by excluding single applicants for public housing from the government's pledge that applicants would not have to wait longer than three years. The pledge was upheld only for families because the waiting list was growing and officials found it difficult to honour it for everyone.

The waiting list grew from 97,402 when Tsang was sworn in to 175,900 at the end of last year. It is expected to hit 200,000 next year.

Under a points-and-quota system introduced for non-elderly single applicants in 2005, many of them - typically manual workers on low wages - have to wait at least seven years. Today, more than 35,000 single people over 35 are in the queue.

While they wait, many are forced to live in cubicles or subdivided flats in districts like Sham Shui Po, where rent is cheap and building conditions poor.

A Housing Authority member who declined to be named criticised Tsang for being overcautious and acting too slowly in responding to market changes.

'It was understandable that he refrained from taking too much action before 2008. But when the market bounced back in 2009 and prices went out of control, he still dismissed calls to resume the Home Ownership Scheme (HOS). It was a failure,' the member said.

After a public consultation on subsidised housing that was launched amid calls to reinstate the HOS, a rent-and-buy programme called My Home Purchase Plan was announced in 2010. Small in scale, it is expected to deliver just 5,000 flats on five sites.

Only after Wang Guangya, the director of Beijing's Hong Kong and Macau Affairs Office, made a public call last year for Tsang to address the housing problem was the HOS relaunched.

But it has remained a half-hearted commitment. Tsang made it clear it was only a 'buffer measure', to be withdrawn at any time when property prices showed signs of an imminent plunge. Its complicated resale arrangements also drew criticism.

What further disappointed interested buyers was housing officials' comments that it would take seven years to complete an HOS project because the sites were not ready for construction, pending planning approval and infrastructure.

Professor Eddie Hui Chi-man, of Polytechnic University's department of building and real estate, said Tsang's slow reaction to changes also applied to the private sector.

'Tsang has stuck to the land-sale application list for too long,' he said. 'There was a land shortage in the market. Investors and speculators as a result were particularly interested, boosting prices.'

With the application list system, the government handed the initiative for land sales to developers, but in 2008 only one small residential site was sold, in Sai Kung.

With few sites available for sale and the application system lacking transparency, developers resorted to their own land banks, acquiring agricultural land in the New Territories and old blocks in urban areas. The controversial law on compulsory sale for redevelopment was passed in Legco by a slender margin to help developers buy up old urban blocks.

Apart from suspending scheduled land auctions, the plan to develop three new towns - in Fanling North, Kwun Tung North and Ping Che in the northeastern New Territories - were also delayed until this month, with the development model and densities still being finalised.

All this has resulted in low numbers of private flats being built during Tsang's reign. The number dropped from more than 22,000 during the Tung administration to 17,300 in 2005 and just 7,200 in 2009.

Meanwhile, property prices have soared. For example, the average per-square-foot price of an 800 sq ft flat on Hong Kong Island rose from HK$6,170 in 2005 to HK$12,533 last year, according to the Rating and Valuation Department.

Prices escalated partly also because the influx of hot money from the mainland boosted demand, especially for luxury properties.

In the first quarter of this year, 33 per cent of the deals struck in the luxury sector - flats sold for more than HK$12 million - involved mainland buyers, according to Centaline Property.

The city saw record-breaking sales, some of which turned out to be bubbles. The most controversial one was Henderson Land Development's project at 39 Conduit Road.

It turned out that 20 of the 24 deals publicised by the developer in 2010, including one for a duplex reportedly sold for a record-breaking HK$88,000 per square foot, were never completed, leading to suspicions of market manipulation.

The case of 39 Conduit Road, still under investigation by the commercial crime bureau, has highlighted deep-seated problems in the primary market, where buyers complain of misleading and pressurising tactics by agents and developers.

Amid mounting calls for regulation, the government introduced a special stamp duty to curb speculation and drafted a law to cover areas ranging from ensuring accuracy in show flats to timely disclosure of transactions.

The proposed law, which is in its final legislative stage, is a second attempt to deal with the problems, after a similar proposal was aborted under pressure from developers a decade ago.

'There should long have been a law to protect home buyers, just like consumers buying vegetables are also protected,' Hui said. 'The government is only doing this to correct past wrongs.'

These wrongs also include a practice, put in place before Tsang's rule, allowing developers to earn bonus floor area for providing green features in their projects. Such features are provided at a relatively low cost, but are included in the per-square-foot price when calculating the gross floor area of each flat in the development.

The practice resulted in flats having as little as 60 per cent actual internal living space, or 'saleable area'.

Public outrage over these artificially inflated homes made the government impose a cap on the bonus policy, so green features can cover no more than 10 per cent of the site's gross floor area.

The future law to regulate the primary market will make the saleable area the only measure to describe a flat's size.

Lee Wing-tat, Democrat and chairman of the Legislative Council's housing panel, said the next administration, under Leung Chun-ying, would need four or five years to correct Tsang's legacy.

'Tsang has created an accumulative shortage in the housing market,' Lee said. 'To ease the shortage, Leung can only raise supply progressively to keep the market steady and keep property owners assured. He cannot flood the market with land and subsidised housing in one go.'