Flats for Hongkongers scheme a failure
Shelving of programme does not mean further easing, but rather a signal that it is not working
When the government said last week that there was no urgency to continue the "Hong Kong property for Hong Kong people" scheme, it was tantamount to saying the initiative, which was introduced in 2012 to reserve selected new homes for the city's residents, was a failure.
Chief Executive Leung Chun-ying suggested on Tuesday last week that when the programme was launched, it was a pilot scheme and would be used only when the market was getting too heated.
Leung said the market had cooled down as the number of buyers from outside Hong Kong had dropped to a very low level.
His remarks were seen as indirectly admitting that the scheme had been suspended and immediately triggered a debate over whether the government might ease other tightening measures.
But Secretary for Development Paul Chan Mo-po denied any such move was in the works.
Rather than heralding further easing of austerity measures, the shelving of the programme is more likely a signal that the scheme is not working.
There are suggestions that the idea itself was not considered politically correct. Beijing is said to be increasingly impatient and frustrated with the radical sentiment in Hong Kong after incidents including a rowdy anti-mainlander protest in February.
A housing scheme designated for Hongkongers to the exclusion of outsiders could reinforce the growing conflict between local residents and mainlanders.
These suggestions will never be confirmed. But even if we do not look at the issue from a political perspective, the scheme is unable to help Hongkongers who are priced out of the property market.
This is because it is too small when compared with the private housing stock in the city, which was about 1.45 million units last year.
So far, only two sites - both in Kai Tak - were sold under the scheme. They will provide only about 1,145 flats when the developer, state-backed China Overseas Land & Investment, completes construction by 2017.
The government has pledged that its land releases will supply 20,000 new flats annually for 10 years. Even if all the new flats each year were designated for Hongkongers, it would only account for less than 1.4 per cent of total supply.
While mainlanders or other non-locals would be banned from buying these new units, they would still be allowed to buy the remaining 98.6 per cent of stock available on the secondary market. It would be a very long time before the scheme would show any effect.
The recent sharp decline in property buying by non-locals is not because of the scheme, but because of the imposition of double stamp duty on purchases worth more than HK$2 million and of buyers' stamp duty - the 15 per cent tax on purchases by companies and non-permanent residents.
When the "Hong Kong property for Hong Kong people" scheme was first announced in Leung's 2012 election manifesto, its failure was predictable.