Analysts question new restrictions on foreign owners of Hong Kong flats

Hong Kong has followed the examples of Singapore and Australia by announcing a scheme to build homes for the exclusive ownership of local residents.

But analysts question whether the scheme can cool the overheated property market.

Last week the government announced a "Hong Kong property for Hong Kong residents" policy and said it had selected two sites in Kai Tak to pilot the scheme. The flats built on the sites may be sold only to Hong Kong permanent residents, for 30 years. The government said the policy aimed to stabilise property prices that have soared in recent years on an influx of mainland buyers.

Australia has a similar policy on restricting foreigners from buying homes in the secondary market, but not the market for new houses. Its Foreign Investment Review Board stipulates that foreigners must get government approval to buy homes in the country. Approval will be granted to buy vacant land, existing residences for redevelopment, and new properties; but foreigners may not buy residential properties that have already been occupied.

The objective of the policy, the Review Board said, was to ensure foreign investment in property increased the supply of homes, and was not speculative.

In Singapore, foreigners are restricted to buying "non-landed properties" - flats - rather than free-standing houses with their own land titles. The only exception is bungalows at Sentosa Cove, the island connected to the southern part of Singapore. In December, the government also imposed a 10 per cent stamp duty on foreigners buying flats.

Still, Singapore's restrictions have failed to curb prices and the same outcome could await Hong Kong's scheme, analysts said. "Sales volume of Sentosa bungalows in Singapore fell, while prices kept rising in the first half of 2012," said Petra Blazkova, head of research for consultancy CBRE in Singapore.