No quick fix on home prices, John Tsang says

PUBLISHED : Saturday, 13 March, 2010, 12:00am
UPDATED : Saturday, 13 March, 2010, 12:00am

Government efforts to rein in rising property prices will take some time to have an impact, the financial secretary warned yesterday. And he reiterated the administration was ready to take more steps to curb speculation in the property market.

'The government will continue to monitor market developments closely. If need be, we will implement additional measures to cool speculation. We also recognise that the property market is extremely sensitive and important to our economy and our community. We don't want to overdo things that would risk hurting the market,' John Tsang Chun-wah said.

The value of residential property in Hong Kong is closely tied to household wealth and the ability of major real estate developers to generate profits that are taxed by the government. Given that real estate is often the single biggest purchase and store of wealth for many households, rising prices are obviously favoured by property owners and developers but detested by aspiring landlords.

Tsang's budget last month was criticised by lawmakers and members of the public for failing to address the difficulties many face in buying a home. Measures unveiled by the government are designed to address concerns by boosting supply. They include increasing the number of flats in MTR Corp and Urban Renewal Authority projects, tweaking the land sale system and enhancing the secondary market for Home Ownership Scheme flats.

The government is also making it more expensive to buy luxury homes and will tax speculators on any gains when buying and selling properties, Tsang said at a business community lunch yesterday.

'This basket of measures is not introduced to be a quick fix, and it does not come with a promise of overnight results. This is a balanced package that serves the entire community, and not any particular sectors, and it will take time to work its way into the market, especially in terms of increasing the supply of flats,' he said.

'Perhaps most important in the short term, these measures should send a clear and strong message to the market, and to the public, of our intentions to curb property speculation and dampen price fluctuations.'

Over the past year, property prices have risen by up to 27 per cent, which the financial secretary had called exceptional. Tsang pointed to the current low interest-rate environment, funds flowing into Hong Kong and the relatively low supply of flats as having increased the risk of a bubble.

The government previously tried to intervene in the market in the 1990s to stop prices rising. The measures, which included banning the resale of uncompleted flats and allowing each buyer to buy only one flat and two parking spaces in the same development, were relaxed or dropped when prices slumped.