Stability above all on housing policy
Nine years ago, the government made a solemn commitment to suspend a long-standing subsidised housing scheme in a bid to give a much-needed boost to confidence in the property market. The decision, fuelled by one of the worst property market slumps, was widely welcomed at the time. There was a need for the market to know that the government would be consistent in its housing policies, and halting the scheme was one of a number of measures aimed at limiting the government's involvement. Since then, the once-popular Home Ownership Scheme (HOS) that gave half a million families a property of their own has been effectively consigned to history.
But market conditions are now radically different. Spiralling properties prices have brought renewed calls for the scheme to be revived. This is not surprising, as, despite a number of tightening measures introduced by the government, property has become increasingly expensive. The calls may now be more difficult to resist, given that a senior Beijing official noted the need for the chief executive to tackle the housing problem. Wang Guangya , director of the State Council's Hong Kong and Macau Affairs Office, said livelihood issues, such as housing and inflation, would turn into political problems if they were not handled properly. His comments were general but have been interpreted as adding to the pressure on Donald Tsang Yam-kuen to resurrect the scheme.
Tsang clearly recognises the need to act, having recently described property prices as 'quite frightening'. But he should carefully weigh the options available rather than simply heeding calls to resurrect the scheme. There remains a need for consistency in housing policy.
The supply of land available for housing is being increased, stamp duty for luxury flats has been raised, and mortgage lending tightened. A rent-to-buy scheme for the middle classes, described by Tsang last year as an improved version of the HOS, is already in the pipeline. We do not want to return to the days of unpredictable housing policies. Wang, during his visit, also reminded the chief executive that he should stand firm on policies that he thinks are in the city's long-term interest.
People in favour of bringing back the HOS are right to say circumstances have changed over the past decade. Rising prices have contributed to unease about the wealth gap. But experience shows any subsidised housing may take several years to complete. Given the volatility in the economy and housing market, the next administration may have to make another shift in direction at the very time the HOS flats are becoming available. And it is doubtful that a few thousand flats a year will make much of a difference anyway - except in terms of relieving political pressure.