Hong Kong Presses Ahead With Measures To Discourage Foreign Buyers
News Posted On: 18 October 2012
Hong Kong’s leaders pledged today to continue with a raft of measures designed to moderate the city’s booming property market. The island city’s market has long since left behind the wages of its inhabitants, provoking a backlash from residents.
Leung Chun-Ying, Hong Kong’s chief executive, said that ‘tackling the housing problem is a top priority of government,’ and went on to ‘assure the public that the policy measures rolled out earlier are only a start.’
In August, Mr Leung laid out a multi-pronged plan for housing in the city. Amongst other proposals, Mr Leung set out to bolster land supply, increase the number of public rental units, and make more subsidised housing available, though his plans have come in for criticism because they don’t include more aggressive policies like higher stamp duties on quick resales, which would penalise speculation.
There are concrete manifestations of Mr Leung’s policies in place already. A 1,100 unit development under construction on the site of the Hong Kong Kai Tak airport will not be available to foreign buyers – or to anyone who has been resident in Hong Kong for less than 30 years. Under the ‘Hong Kong land for Hong Kong people’ program, no private investment companies will be permitted either.
Mr Leung pulled no punches in his statement, saying ‘In future, we will continue to implement timely initiatives to assist the grassroots with flat accommodation, help middle class families buy their own homes and promote the stable development of the property market.’
Mr Leung had hoped to carry out a reorganization of the structure of Hong Kong’s government, but the proposals were controversial and he has shelved them in favour of concentrating on housing and poverty reduction.
Hong Kong has no official central bank, but its de facto central bank, the Hong Kong Monetary Authority, joined in the government’s attempts to cool the market, ordering banks to curb loans to borrowers with more than one mortgage, to prevent the city being flooded with hot money after the US stimulus package was announced.
Hong Kong’s government is forced to take actions like this to control the city’s economy because it does not set its own interest rates. Rather they are linked to the US, whose interest rate is down to 0.25%, in an attempt to start up economic growth in the country. Hong Kong, however, contains several of Asia’s most expensive apartments, including the world’s second priciest on a foot by foot basis, and low interest rates there are boosting an already overheated housing market.
One group of beneficiaries of the market’s explosion has been mainland Chinese, a fact which triggers tensions on an island which only returned to Chinese rule in 1997. Mainland Chinese are attracted to Hong Kong for both investment and residence, and the influx of mobile capital has stirred up feelings against foreigners and mainlanders. Mr Leung’s own election was widely reported in terms of his backing from Beijing and he has struggled to rid himself of the nickname ‘Little Wolf,’ a reference to Beijing’s support for his candidacy. As a result it’s possible that his insistence on the importance of local, populist policies represents an attempt to establish himself as a leader for Hong Kong, not Beijing.
Despite Mr Leung’s assertations that ‘I and my team are committed to solving the housing problem,’ UBS doesn’t see any significant changes in the near future. A UBS report published on Monday predicted that Hong Kong house prices would rise another 10%-15% in 2013, and expected that chronic housing undersupply would also continue. ‘…Projected land supply should fall 13% short of its target of 20,000 units per annum in 2012,’ according to the report.
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Written by Les Calvert
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