A scheme to build homes exclusively for Hong Kong people in an effort to provide middle-class buyers with affordable flats may be shelved.
Chief Executive Leung Chun-ying suggested yesterday that the Hong Kong Property for Hong Kong Residents scheme could be suspended as the number of outside buyers in the market had dropped to a "very low level".
But real-estate analysts said the scheme, under which flats built on selected sites can be sold only to Hong Kong permanent residents, should be scrapped altogether as it had been ineffective in providing cheaper flats.
"When we launched the programme, we said it was a pilot scheme and would be used only when the market was getting too hot," Leung said yesterday. "But after we launched two stamp duty measures, the market has cooled down."
He did not give a direct answer to questions about whether the scheme had already been shelved.
Under the scheme, announced in Leung's 2012 election manifesto, the flats are restricted to Hong Kong permanent residents for at least 30 years and can be rented to non-Hong Kong tenants for only five years.
It was aimed at shielding middle-class buyers who did not qualify for any government subsidy from the effect of mainland speculators who were blamed for heating up the market.
But other anti-speculation measures have since been imposed, including a 15 per cent stamp duty on sales of flats to non-local buyers.
Apart from incorporating the sales conditions into land leases, the Development Bureau said earlier that it would draft a new law to back up the scheme. It declined to say yesterday whether it had stopped drafting the law.
Leung's comments came as he addressed a news report claiming the scheme had been shelved. "We are still monitoring the development of the property market. The demand from overseas buyers has dropped to a very low level," he said.
"The scheme has been accepted by the market and is feasible. [If shelved,] we can reintroduce it in a short period of time when necessary."
Centaline senior associate research director Wong Leung-sing said it was the spectre of rising interest rates that had dampened interest in the property market. He believed that the scheme should be scrapped.
"Mainland buyers are the scapegoat. The heated market was actually caused by a long period of low interest [rates]," he said. "The scheme will not provide cheaper flats. On the contrary, the Kai Tak sites sold under the scheme were the priciest in the district so far."
The Kai Tak sites are among four sold under the scheme so far. The others are Housing Society projects in Sham Shui Po and Shau Kei Wan.
Purchases by non-local buyers and firms fell to an average of 96 a month or 2 per cent of total transactions last year, much lower than the monthly average of 365 purchases or 4.5 per cent of transactions from January to October 2012.
Chau Kwong-wing, chair professor of the department of real estate and construction at the University of Hong Kong, said the scheme did not lower overall flat prices. "Unless it is applied to all sites, non-local buyers can always get a flat on other sites," he said, adding that the scheme only reinforced conflict between Hong Kong and the mainland and "hurt the city's image".