Broad range of measures to be combined with timely intervention

In view of skyrocketing property prices, the government has unveiled various measures to combat a property price bubble, including measures to increase land auction and flats supply, to boost transparency in flat pre-sales, to stimulate the secondary market for Home Ownership Scheme (HOS) flats and to consider heavier stamp duties for property transactions.

Financial Secretary John Tsang, speaking Wednesday at the Legislative Council (LegCo) in debating the Budget 2009-2010, explained the detailed measures designed to curb rising local property prices.

He announced that in addition to the scheduled Tung Chung and Fanling public land auction in May, the Ho Man Tin Valley Road Estate and Midlevel Mount Nicholson Road land parcels will also be auctioned in June and July, respectively. The Government has estimated that the total four land auctions can provide an additional 3,750 flats to the market.

Besides more public land auctions, increasing home and flat supply immediately is the other way to tackle the issue. Under the new measures, when property developers introduce medium-size projects, they have to put up 30 flats or 30 percent of the total saleable flats, whichever is higher, for sale in their initial launch. For large-scale projects, they have to put up at least 50 flats or 50 percent of the total saleable flats, whichever is higher, for sale.

Regarding property sales techniques that have infuriated the public, Tsang introduced nine new measures to rein in undesirable sales practices. For property sales in the primary market, developers must provide home sales documentation seven days before public sales. They are also obligated to give property price quotations three days before public sales. All of these forms of information have to be updated on the company website simultaneously.

Concerning completed first-hand property, developers have to provide on-site flats for public inspection and these flats' specifications have to be identical to those for the model flats. Moreover, promotional and publicity materials must include the location information for the property sites. Property developers must also disclose transaction details relating to property developers' directors and any transaction-related immediate family members within five days after the transaction.

"All these measures are to eliminate unsymmetrical information problems that will push up prices in property sales," said John Tsang, adding that if the property market does not cool down following the new measures, the administration will initiate more measures. If market speculation continues, the administration may also raise the stamp duty on homes sold for less than HK$20 million. In February, the government announced that the stamp duty on homes selling for more than HK$20 million would be increased to 4.25 percent from 3.75 percent as of April 1.

Stimulating the secondary market for HOS flats is also another device to tackle the soaring property prices. Secretary for Transportation and Housing Eva Cheng said in the LegCo that the government is considering allowing HOS home owners to pay back their flats' price discount in installment payment form. The administration is also considering ways that can help potential HOS flat buyers secure mortgage bank loans amortized over as long as twenty-five years.

"Increasing home ownership is not the policy objective of the administration," Cheng reiterated, adding that the government will act prudently to decide whether to resume the Home Ownership Scheme.

The Real Estate Developers Association of Hong Kong said that they had been briefed by the administration measures, adding that these proposed measures can be executed.

Property market analysts told China Daily that the administration is trying to resume a proactive stance in the property market.

"Initiating public land auctions irregularly can send a market signal that the administration will increase flat supply whenever it sees the timing as being appropriate. By calming down the frenzied mood of home buyers, it will alleviate the scramble for flats that will propel property prices even higher," Wong Leung Sin, associate director of Centaline Property Research Department told China Daily.

Wong predicted that local property transactions in this quarter will decrease as market players will digest the consequences of these measures on the market, while property prices may remain somewhat sluggish.

Local property prices soared 5 percent in the first quarter of this year, while the ratio of home mortgage installment payment to flat owners' disposable income has increased to 42 percent, government statistics showed. Tsang said that although this is still lower than the average level, the increasing trend is nonetheless disturbing to the administration.

China Daily

(HK Edition 04/22/2010 page2)