Two sites to be auctioned to increase flat supply

PUBLISHED : Thursday, 22 April, 2010, 12:00am
UPDATED : Thursday, 22 April, 2010, 12:00am

The government is putting two residential sites up for auction in an effort to increase flat supply, as new figures show Hong Kong buyers now pay more than 40 per cent of the median income on their mortgages.

The announcement comes less than two months after the sites, in Ho Man Tin and Mount Nicholson ,were listed among six the government said it would put up for auction within the next two years if their sale had not been triggered by applications from developers.

Financial Secretary John Tsang Chun-wah said the auctions were being initiated to demonstrate the government's determination to increase land supply and to reduce the risk of a property bubble.

But Chau Kwong-wing, chair professor of the University of Hong Kong's department of real estate and construction, said the two sites were likely to provide luxury flats, which would be sold for more than HK$10,000 a square foot. The number of flats built on the sites would not be significant enough to reduce prices.

Chau urged the government to increase land supply and disclose the minimum price required for developers to trigger auctions for sites on the land application list.

The Ho Man Tin site will be sold in June and the other in July. They will provide 1,200 flats. Two sites in Tung Chung and Fan Ling triggered by developers for auction next month they will provide a further 2,550 flats.

Tsang also urged flat buyers to be careful to ensure they could afford payments if interest rates rose.

He said the ratio of mortgage payments to median household income had climbed from 38 per cent in the fourth quarter of last year to a preliminary figure of 42 per cent in the first quarter of this year.

His remarks stood in contrast to past government assurances that property prices were still far below the peak of 1997.

A total of 58,500 new private flats will be available in the next four years, including 3,500 from sites to be allocated by grant or tender.

Despite the initiation of land auctions, the government still has reservation about resuming the building of subsidised Home Ownership Scheme flats for sale.

Housing minister Eva Cheng said the government would not intervene in the market hastily, but measures may be introduced to encourage the resale of existing HOS flats, including streamlining the resale procedures, allowing owners to pay land premiums in instalments and providing mortgages on older flats.

Straight talk

'I appeal to citizens and small investors who would like to buy a flat to carefully assess the impact of future interest rate hikes on their ability to repay their mortgages .... If the interest rate were to rise by three percentage points and return to a more normal level, the monthly mortgage payment would surge by 30 per cent.'

Financial Secretary John Tsang

'Encouraging home ownership is not our policy objective. Our policy is to provide subsidised housing for low-income families who cannot afford private housing.'

Secretary for Transport and Housing Eva Cheng