With a massive overhang of empty flats on private housing estates, the Government's decision to sell only about 5,000 Home Ownership Scheme units over the next 12 months should help stabilise the market.
House prices have fallen for five years, forcing many home owners into the negative equity pit. With about 50,000 new flats due to be completed over the next two years, sensible steps need to be taken to arrest further erosion of values.
The expansion of the loan scheme for buyers of private flats is another confidence-boosting measure. Even with this shot in the arm, prices are unlikely to climb back to the hysterical levels recorded in 1997.
From 2005/06, the plan is to control supply of HOS flats at about 2,000 a year, reflecting the Government's commitment to maintain a residual capacity to intervene in the market. Such intervention, though theoretically undesirable, may be necessary over the medium-term as developers have launched few new constructions over the past few years and an under-supply could possibly emerge several years down the road.
As a means of rectifying the administration's failure to engineer a soft landing for the housing market - what it did after the handover actually aggravated the plunge - the measures being taken to prop up the market are justified.
Over the long-term, however, Hong Kong's housing policy remains muddled. Will we still need the HOS, or even the home purchase loan scheme, in 10 years? And should not the public rental housing scheme providing accommodation to half the population be scaled down or privatised? It's time the government trimmed down its direct involvement in housing.
