When the Hong Kong government said last week there was no urgency to continue the “Hong Kong property for Hong Kong people” scheme, it was tantamount to saying the initiative – 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 the shelving of the programme heralding further easing of austerity measures, it is more likely that it is because the scheme isn’t working.
There are suggestions that the idea itself was not considered politically correct. Beijing is said to be increasingly impatient and frustrated with 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 Hongkongers and mainlanders.
These suggestions will never be confirmed. But even if we do not look at the issue from a political aspect, the scheme is unable to help Hongkongers priced out of the property market.
This is because it is too small when compared with the private housing stock in Hong Kong, 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 per year 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 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 buyer’s 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.