• Fri
  • Aug 22, 2014
  • Updated: 10:06am
PUBLISHED : Tuesday, 02 July, 2013, 12:00am
UPDATED : Tuesday, 02 July, 2013, 3:12am

Developers feel the heat of Leung's cooling measures

Administration sticks with punitive tax system as property prices remain stubbornly high


Sandy Li joined SCMP as a property reporter in 1996, and was promoted to senior reporter in 2005 and deputy property editor in 2009. During her career she has won several journalism prizes, including the Citi Journalistic Excellence Award in 2011. She was first runner-up for the same award in 2010.

Chief Executive Leung Chun-ying, who took office a year ago, appears to be playing hardball with developers as he tries to deliver on his election promise to increase the supply of flats and bring prices down to a reasonable level.

Last week, his administration unveiled two policies that include initiatives mainly aimed at increasing the supply of private and government-subsidised flats and exerting downward pressure on prices.

On Thursday, Secretary for Transport and Housing Anthony Cheung Bing-leung announced an extension of the pre-sale period for private residential developments from 20 months to 30 months, while a batch of 2,100 Home Ownership Scheme subsidised flats will be put on sale 24 months before completion, instead of the usual 15-month pre-sale period.

The first part of those measures will help release a potential 15,000 private flats for pre-sale, which should help push prices lower.

On Friday, Secretary for Development Paul Chan Mo-po said the government had earmarked three sites in Shek Mun, Sha Tin - originally allotted for private residential purposes - for public rental housing after seeing a softening of demand in the private market.

The three sites would have provided 200 new flats. Chan said the government needed them to help it meet the target of building at least 100,000 public housing flats in the five years from 2018.

Due to the change, the nine sites to be released by the government for tender in the next three months will yield 2,500 private units, down 20 per cent from the previous quarter.

Property commentators have cast doubt on the government's ability to meet its target of providing 13,600 new private flats in the 12 months from April, given the growing difficulties it is facing in looking for land.

But they may be overreacting because the overall supply of flats will increase, albeit with more designated for public rental housing.

This will enable the government to help the grass-roots by shortening the waiting time for public rental flats, a move that sends a clear signal to the community that Leung will actively address the housing issue - something he promised to make his top priority when he was elected.

Developers are likely to continue complaining about the increase in duties and other measures introduced in recent months to rein in prices and investment demand. But their complaints will fall on deaf ears, with Leung intent on adopting a more populist stand, especially as home prices remain high.

In Leung's first year in office, home prices rose 15 per cent. But they started to ease in mid-March after the administration rolled out a string of cooling measures designed to curb demand, such as October's introduction of buyers' stamp duty and special stamp duty and February's introduction of double stamp duty.

Although the number of homes sold dropped 45 per cent from January to 5,288 last month, prices have fallen just 2 per cent from their mid-March peak, with developers and home owners reluctant to cut prices.

High property prices provide Leung with a solid base for sticking to his guns on the punitive tax system. How the developers respond to the government's tightening measures and Leung's increasingly populist stand will be closely watched by the market.



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This article is now closed to comments

In the interests of humanism, subsidized housing should most definitely be a priority. As well, there should definitely be consideration to resume any land that is not developed within a period of time to prevent "land banking" and to increase the supply of land.
The government should introduce capital gain tax, capital tax on non primary homeowners, people who own more than one flat, to finance the building subsidized rental housing. The government should also take back the land from developers if the lands were not developed within 2 years from purchase, this should avoid land hoarding by developers and increase home supply.
A much increased property tax is preferable to a capital gains tax . Property taxes tend to be a more stable source of revenue and target those who are more able to contribute.
The lent government needs to be careful with more policies and at this point just let the market run its course. Interest rates will rise soon. When this happens the government will need to move fast to unwind all the policies put in placeless they will cause a massive crash as in a downward market the only people who can lessen the crash is investors.
A crash is the logical outcome of a bubble. I would argue the housing market is much deviated from its calculated fair or intrinsic value, with the deviation primarily due to temporal demand factors.
If the home price drop resulted in negative equity to investors, so be it! The government need to protect the principal home owners only, people who owns only one flat to live in. I have no sympathy for the property speculators, and home prices rise in the last few years is just ridiculous! Home is a NECESSITY and NOT a commodity.
Principal home owners should not be "protected". Pay up.
It takes political fortitude to change the property culture in Hong Kong by sidelining the influence of the developers. Leung’s earlier presale is questionable. He may be loosing his gut to take on the deelopers.Or just a political expediency to respond timely of the street protest. But Leung should reserve the right as government to take back the undeveloped land from developers’ land banking. When this happens, the heat is really on and feeling it will not be.


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