Developers feel the heat of Leung's cooling measures
Administration sticks with punitive tax system as property prices remain stubbornly high
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.