Soaring prices that put flats beyond the reach of an increasing number of first-time buyers have raised pressure on officials to address public disquiet about the property market. The problem for the government is that heavy-handed intervention would risk distorting it and upsetting existing homeowners, to whom residential property is their main store of wealth. That was reflected in the recent policy address by the chief executive, who announced modest measures to ensure a stable land supply for housing and help renters eventually become buyers. Unfortunately the measures will make little difference to most of the people who now find themselves priced out of the market.
In an effort to take some of the heat off the government by being seen to be doing something, Donald Tsang Yam-kuen also announced proposals to address contentious sales practices by developers that tend to compound resentment of the affordability gap. Firstly, the administration has tackled the inflation of flat sizes by the inclusion of 'green features' and common areas. It proposes that the saleable area of a flat become the only basis for listing the price per sq ft, rather than the gross floor area including bay windows, air-conditioning plant rooms and other common facilities, which makes the price sound cheaper. This would end confusion caused by the recent practice by developers of listing prices both ways. A cap would also be imposed on the exemption from gross floor area of green features and amenities, for which developers do not pay land premium but charge buyers. These should not exceed 10 per cent of the gross so as to minimise the 'wall effect' of buildings that inhibit natural ventilation.
These measures, recommended by the Sustainable Development Council earlier this year after a public consultation, address problems that arose from a scheme introduced in 2001 to encourage developers to improve the environment and amenity of their projects, in return for land-premium concessions. Developers took advantage to increase green features at the expense of living space.
Secondly, the Housing Bureau is setting up a steering committee to consider regulating the sale of flats by law, including sales practices, price lists, show flats and saleable area.
The Real Estate Developers Association says it will try to work with the government, though it debates the need to tweak recently update sales guidelines it says have been 'working well' and hints that some proposals may not be 'feasible'. But it is flatly opposed to a law to regulate sales practices.
Opposition to regulation is in keeping with the city's free-market system. Politically, however, the government is between a rock and a hard place. It is one thing to have put property off limits to investment migrants until things cool down; but suggestions that the government curb property investment by cashed-up mainlanders, who are blamed for driving the price spiral, are another thing entirely.