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Thursday, October 13, 2016, 23:48

HK$2m flats mulled to beat homes crisis

By Oswald Chan
HK$2m flats mulled to beat homes crisis
Chief Executive Leung Chun-ying told a Rotary Club of Hong Kong dinner on Wednesday that Hong Kong still has a healthy amount of undeveloped land at large. He urged the community to help the government convert land to build affordable homes for the public as quickly as possible. (Cho Seong-Joon / Bloomberg)

Chief Executive Leung Chun-ying has come up with a bold new plan to unplug Hong Kong’s escalating housing problem by selling apartments to the public for less than HK$2 million to benefit those in urgent need, such as newly-weds.

In his view, the goal can be attained through the government continuing to increase land supply by locating more undeveloped land or rezoning them for residential development.

However, economists and industry pundits have poured cold water on the idea, with one of them comparing it to a “lottery draw”.

CE proposes apartment prices be pegged to building costs to help the needy

Instead, they reckon that building more subsidized homes would be far more practical in ending the housing gridlock.

Speaking at a Rotary Club of Hong Kong dinner on Wednesday, Leung suggested that land costs be excluded from prices of new apartments and that only the construction costs should be taken into account.

High land prices, he admitted, have largely to blame for the current runaway property market.

“Such apartments can be sold for below HK$2 million each to homes buyers in urgent need, such as newly married couples.”

How could the plan be turned into reality, implemented or where such homes could be built? Leung offered no answer for the time being.

However, he vowed to continue combating speculation and to complete the construction of 97,000 public housing units and 93,000 flats in the private sector by 2021 in line with the government’s priority of boosting home ownership among Hong Kong people.

Hong Kong, he said, still has a healthy amount of undeveloped land at large, and he urged the community to help the government convert land to build affordable homes for the public as quickly as possible.

Terence Chong Tai-leung, executive director at the Chinese University of Hong Kong’s Lau Chor Tak Institute of Global Economics and Finance, alluded to the Chief Executive’s idea as “trying one’s luck” in a lottery draw.

“Without specifying the criteria prospective buyers must meet to qualify for purchasing such flats, it all sounds like a lottery draw — you’ve to rely purely on luck as to whether you can buy them,” he told China Daily.

“Besides, even if the apartments can go for HK$1 million each at the initial launch, they could change hands later for between HK$4 million and HK$5 million if property prices continue to go up. Unless the government builds such cheap flats on a big scale that could push down prices immediately, it won’t be able to halt the city’s soaring homes prices,” Chong said.

“So, I would say building more subsidized apartments under the current Home Ownership Scheme is more practical. It will increase home ownership as prices continue to climb.”

Wong Leung-sing, associate research director at Centaline Property Agency, warned that Leung’s proposal may lead to a vast pool of unsold flats in the New Territories as residents are more likely to choose apartments in Kowloon and on Hong Kong Island, betting that their value is in a better position to go up.

According to the Land Registry, homes sales in the SAR hit the highest level in 15 months in September, with the number of transactions reaching 7,826 on a total value of HK$56 billion — a month-on-month gain of 34 percent and 38 percent, respectively.

Local apartment prices have rebounded from a six-month slump when they fell 13.3 percent from a record high in September last year. Current prices are down by just 6.3 percent from their peak a year ago.
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