Expectations are high for the first policy speech by Chief Executive Carrie Lam. But the public focus will almost certainly fall on the part about housing.
Since she took office in July, Lam has taken a number of initiatives, particularly the shared flat proposal, that have helped raised public confidence in her government’s capability in bringing relief to the many thousands of families that are forced to live in abysmal conditions by Hong Kong’s abnormally high housing cost.
In different occasions, she mentioned various other proposals, particularly the subsidies to first time home buyers, which are widely interpreted by the market as an indication of a fundamental change in the government housing policy. Any change is welcome because of the perceived ineffectiveness of the previous approach in solving the housing problem.
In the past, the government concentrated its efforts to combat rising home prices with a combination of administrative measures and market intervention. A slew of measures were introduced to raise the transaction cost with the aim to dampen demand. Separately, the government made an Herculean effort to increase the supply of land for development with the hope the expected increase in new apartments put on sale in the market can help level off prices.
None of that worked, while property prices continued to surge uninterrupted in the past 18 months. Repeated warnings about rising interest rates have failed to deterred determined home buyers who had little problem in getting credit from banks and non-bank lenders, most of which are affiliated with property developers.
Apparently, the situation has brought the government around to the view that it is futile to fight the market. In the long-term, the problem can only be addressed by building more subsidized housing to satisfy people’s needs. That would take time.
Meanwhile, the public have largely lost their patience. They want to see government actions that promise to produce immediate results. Lam’s approach is to set goals that are practical and achievable. Some of her proposals would involve the active participation of the developers.
Indeed, private sector enterprises have served Hong Kong well in various other economic sectors, particularly utilities and public transport. And they can do it profitably.