Hong Kong housing

Chief Executive CY Leung’s proposal to lower housing prices wouldn’t improve affordability, experts say

Hong Kong Housing Authority dismisses suggestion to tie flat prices to construction costs

PUBLISHED : Thursday, 13 October, 2016, 8:12pm
UPDATED : Thursday, 13 October, 2016, 10:00pm

Chief Executive Leung Chun-ying’s proposal to lower apartment prices by pegging them to construction costs has been criticised by housing experts who said it fails to solve the crux of the city’s land shortage issue.

At a dinner on Wednesday, Leung said young couples would be able to buy their own homes for as low as HK$1 million if they only had to pay construction costs. He did not elaborate on how such an idea would work out.

Head the University of Hong Kong’s real estate and construction department Professor Chau Kwong-wing, said the plan was not feasible for government subsidised flats.

“The discount is not the key issue here. If the size of the cake is small, it doesn’t matter how you cut it, prices would still not be affordable for those who aren’t eligible for subsidised housing,” Chau said.

“You can reduce the price, but with so few units available, it doesn’t make a difference.”

Chau said if more land resources were allocated to subsidised flats being sold at construction costs, it would make private sector apartments more unaffordable.

“This would mean less supply of private flats and those who aren’t eligible for government subsidised flats will suffer even higher prices,” Chau warned.

Last year, the government admitted it would fall short of its 10-year public housing production target of 280,000 units by 25,000.

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Earlier this month, Our Hong Kong Foundation, a think tank headed by former chief executive Tung Chee-hwa, put forward a similar proposal of pricing flats according to their construction cost.

Housing Authority member Stanley Wong Yuen-fai said the plan was not practical and many members had dismissed the idea.

“The location is really what differentiates property prices...we’ll end up having properties in Tin Shui Wai being at the same cost as those in San Po Kong,” Wong said.

However, executive director of the Federation of Public Housing Estates Anthony Chiu Kwok-wai backed Leung’s suggestion, saying it would help more families achieve their dream of owning property.

Chiu, however, said the Housing Authority would require additional funding to build public housing if flats were to be priced at construction costs. He noted that surplus profits from the sale of subsidised flats usually goes towards building more units.