Public rental tenants should be encouraged to buy under Home Ownership Scheme
Specialist believes more use of the HOS, combined with a government drive to make more land available, would help ease the city’s land and house prices
Nicholas Brooke is the chairman of Professional Property Services, a specialist real estate consultancy based in Hong Kong, providing clients with a selected range of advisory services across the Asia-Pacific region. He gives his thoughts on Hong Kong’s housing strategy.
Do you believe property prices here are high because of bad planning by the government, and a small group of developers who have cornered the market?
Previous administrations failed to appreciate the need for a land bank of potential development sites which could, quite quickly, be brought to market so as to meet the aspirations of a growing population wishing to have their own, rather than family, homes. In reality, the private-sector market in
Hong Kong, involving the production of 20,000 to 25,000 units [annually], is not all that large and, as a consequence, can [only] support a limited group of developers. This situation results in them
having the ability to influence and shape the
market. Furthermore, height and density and
high land costs do not encourage smaller participants.
Can property developers help curb high
property prices, or are their hands tied by
high construction costs?
[Developers] face a dilemma in that they see their prime responsibility is to their shareholders. If they are to recover high land costs and the increasing cost of construction, and produce an acceptable return, then their minimum pricing is essentially predetermined. Hopefully, greater land supply will lead to an easing of land values and, if a consensus can be reached on the import of construction labour, then that minimum could fall. Construction costs are a particular challenge at present, equalling in many instances the cost of land.
Would building more public housing
units provide a solution to the shortage in affordable homes?
Personally, if we are to invest in public housing, I would focus exclusively on home ownership, while ring-fencing the current public rental stock. Public rental tenants, who can afford to do so, [should be encouraged] to purchase [units under the] Home Ownership Scheme (HOS) and make way for those [who are] on the three-plus years [waiting list for [public housing]. I think we already have a huge social and economic challenge with our existing public rental stock and I am very cautious
about building more without changing the occupancy rules.
As a former member of the Town Planning Board and Housing Department, what is your advice to the government on making property affordable to the middle class?
Primarily, it is a question of making more land available for residential purposes which, of course, the government is striving to do. However, it is largely playing catch-up due to a previous legacy of neglect and the fact that many potential sites are not available for immediate development due to planning or infrastructure constraints. Nevertheless, I am concerned that even if we have adequate supply, this is being achieved by building smaller and smaller units in order to meet affordability limits and this is not sustainable in the longer term.
Should Hong Kong adopt Singapore’s public housing strategy, or should it revamp the Housing Department and launch a new model here?
Essentially, I think we need a Hong Kong-tailored model and we should be requiring our developers, in their larger projects at least, to provide an element of affordable housing [of about 20 per cent of a development] and housing for the elderly [10 per cent] and this would be reflected in the land premium assessment. This approach would be complemented by converting the current allocation of public rental to HOS.