(Source : Information Services Department)
LCQ 21: Measures for cooling down the overheated property market and meeting public demand for housing
Following is a question by the Dr Hon LAM Tai-fai and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (December 17):
To address the overheated property market, the Government has introduced one after another several demand-side management measures (measures), including Special Stamp Duty (SSD), Buyer's Stamp Duty (BSD) and doubled ad valorem stamp duty (DSD). Some members of the public have criticised that these measures can only slow down the rise in, but not lower property prices, and they have caused the number of transactions to shrink significantly. With a severe shortage of housing and land supply, these measures not only fail to help members of the public (particularly young people) purchase homes, but have also created grievances in society. They even damage the business environment, hampering the desire of overseas investors to invest in Hong Kong. In this connection, will the Government inform this Council:
(1) of the respective amounts of revenue brought to the Treasury by the aforesaid measures since their implementation, as well as the respective numbers of transactions involved (broken down into categories of residential and non-residential property in Table 1);
(2) whether it has plans to return the revenue mentioned in (1) above to members of the public; if so, of the details; if not, the reasons for that;
(3) of the respective numbers of monthly transactions of newly completed building units and second-hand building units since the implementation of the aforesaid measures; whether it has assessed if such measures have fulfilled the objectives of promoting the healthy development of the property market and meeting the home ownership needs of members of the public;
(4) given that the Government has said that it would continue to boost land supply in the short, medium and long terms, and has identified about 80 additional sites in various districts with the potential to be rezoned for residential use, which could be made available in the next five years to provide 89 000 units, of the progress of the construction of such units, and whether it has assessed if these units can be put up for sale on schedule;
(5) apart from the provision of 2 160 Home Ownership Scheme (HOS) units in 2016-2017, whether the authorities will provide more HOS units in the coming few years in response to market demand;
(6) whether it has reviewed if the aforesaid measures have dampened the desire of overseas investors to purchase properties in Hong Kong; if it has, of the details; if not, the reasons for that;
(7) whether it has reviewed if the aforesaid measures have weakened Hong Kong's competitiveness and prompted investors to invest in other places; if it has, of the details; if not, the reasons for that;
(8) given that the authorities have said that they would monitor the situation of the property market and reviewed the measures in a timely manner, to what level the properties prices have dropped will the authorities consider withdrawing or adjusting the aforesaid measures; and
(9) of the progress of the Youth Hostel Scheme implemented by the Government; the respective districts in which each project under the Scheme is located and the respective numbers of units to be provided by each project; whether the Government has any specific measures, apart from implementing the Scheme, to help young people purchase their homes; if it has, of the details; if not, the reasons for that?
In the past few years, serious housing demand-supply imbalance, coupled with ultra-low interest rates and abundant liquidity under the loose global monetary environment, have seen the local property market out of line with economic fundamentals, with heightened risk of a bubble. Against such background, the Government has introduced several rounds of demand-side management measures, including Special Stamp Duty (SSD)(November 2010 and October 2012), Buyer's Stamp Duty (BSD) (October 2012) and a doubled ad valorem stamp duty (DSD) (February 2013). These measures aim to address the overheated property market, combat speculative activities, ensure healthy and stable development of the property market, and accord priority to the home ownership needs of Hong Kong permanent residents (HKPR) in the midst of the present tight housing supply.
In respect of the specific questions asked by the Dr Hon Lam Tai-fai, the consolidated reply is as follows:
Demand-side management measures
The monthly statistics of agreements for sale and purchase of residential units for both primary and secondary sales from November 2010 (i.e. the month when SSD was introduced) to November 2014 are at Annex. As shown in the figures, the numbers of average monthly transactions were 4 223 in 2013 and 5 254 for the first 11 months of 2014, which were lower than those of 2011 (7 039 on average monthly) and 2012 (6 778 on average monthly).
Under the demand-side management measures, in acquiring a residential property, a HKPR buyer is exempted from paying BSD, as well as the ad valorem stamp duty at the higher rates (i.e. Scale 1) if he/she is not a beneficial owner of any other residential property in Hong Kong at that time. We consider that such arrangements have effectively addressed the home ownership needs of HKPR.
Increase in property prices has been moderated since the introduction of DSD in February 2013. For the first two months of 2013 (i.e. before the introduction of DSD), property prices increased by 2.7% per month on average. From March 2013 to October 2014, the increase was 0.6% per month on average. Besides, stamp duty statistics from the Inland Revenue Department indicate that the number of short-term resale transactions (including confirmor transactions and resale within 24 months) remained at a low level in the third quarter of 2014, with a monthly average of 84 cases, or 1.2% of the total transactions. This represents a sharp decrease from the monthly average of 2 661 cases (or 20% of the total transactions) during January to November 2010 (i.e. before the introduction of SSD). Also, purchases of residential property by non-local individuals and non-local companies stood at a monthly average of 126 cases, or only 1.7% of the total transactions, in the third quarter of 2014, markedly below the monthly average of 365 cases (or 4.5% of the total transactions) from January to October 2012 (i.e. before the introduction of BSD). It can be seen that demand-side management measures indeed help stabilise the residential property market, and are effective in combating short-term speculative activities and curbing external demands.
According to the statistics of the Stamp Office, the number of residential property transactions chargeable to SSD and BSD as well as the amount of stamp duty involved in the period since the implementation of the measures (up to November 2014) are tabulated in Table 2.
As for DSD, since the Stamp Office is now processing applications for charging ad valorem stamp duty at a lower rate (i.e. Scale 2) for transactions made during the transitional period (i.e. the period between the introduction of DSD on February 23 2013 and before the gazettal of the relevant Amendment Ordinance on July 25 2014), the number of transactions chargeable to additional ad valorem stamp duty (i.e. the difference between ad valorem stamp duty calculated at Scale 1 and Scale 2) and the amount of stamp duty involved are not available at this stage.
According to the Government's established principles of public finance management, all revenue from stamp duties, similar to other tax revenue, will be credited to the General Revenue. The Government will then allocate resources to different streams of work and services to ensure that such work and services can cater for various needs of the community. The Government will not rigidly require that a particular item of revenue or a certain proportion of it can only be designated for a particular use. Otherwise, the allocation mechanism of the public financial resources will lose its flexibility.
The policy objective of introducing the demand-side management measures is to ensure the healthy and stable development of the property market, and this is of paramount importance to the sustainable development of Hong Kong as a whole. While we understand that these measures will cause inconvenience to certain buyers as well as business and industrial enterprises, after balancing various considerations, we consider it necessary to enhance demand-side management under the exceptional circumstances of low interest rate, abundant liquidity and serious demand-supply imbalance. If the build-up of a property bubble is left unchecked, it would create a greater impact on Hong Kong's economy in the event of a bubble burst, which could bring even more adverse consequences to the business and the investment environment. The demand-side management measures help protect Hong Kong's macroeconomic and financial stability, which is of benefit to the overall economy of Hong Kong in the long term and serves the best interest of the community as a whole.
The demand-side management measures are extraordinary measures introduced under exceptional circumstances. We will continue to closely monitor the property market with reference to a series of indicators and review the situation at appropriate time. These indicators include property prices, affordability of the public, transaction volume, supply situation, ratio of mortgage or rental to income, etc., as well as changes in the local and external economic situations, e.g. the pace of adjusting or withdrawing the quantitative easing policies by the US or European countries, etc. The Government has also undertaken to review the demand-side management measures one year after the passage of the relevant Amendment Bills that promulgated the demand-side management measures and report the outcome to the Legislative Council (LegCo).
Increasing Land Supply
As stated in the paper to the LegCo Panel on Development submitted by the Development Bureau in January 2014, some 150 potential housing sites were identified as having potential for both public and private housing development after the respective statutory plans are amended. If the amendments proceed as planned, the sites could be made available in the coming five years for providing over 210 000 flats, of which 70 per cent are for public housing. The said 150 sites have already included the some 80 housing sites which have potential for housing development as mentioned in the question by the Dr Hon Lam Tai-fai.
As at end November 2014, out of the some 150 potential housing sites, statutory planning process have been initiated for 42 sites with an estimated flat yield of 37 800 units, of which 57 per cent are public housing units.
Assistance in Achieving Home Ownership
To establish an effective housing ladder to facilitate low- to middle-income groups (including young people) to achieve their aspirations for home ownership, provision of Home Ownership Scheme (HOS) flats and other subsidised sale flats is now a standing feature of our housing policy.
Early this year, the Chief Executive announced in his Policy Address that the Government would endeavour to achieve the supply target of about 80 000 subsidised sale flats in the next ten years. The Hong Kong Housing Authority (HA) will launch the pre-sale of the first batch of 2 160 new HOS flats by the end of this year. These new HOS flats have a pre-sale period of about 24 months. Depending on the construction progress of the next batch of new HOS developments, their estimated completion dates and the progress of the preparation work for the sale of flats, the pre-sale of the second batch of new HOS flats is tentatively scheduled for mid-2016. Subject to the construction progress of respective HOS projects, the HA will determine the number of the second batch of new HOS flats for pre-sale later. In addition, the HA decided in November 2014 to launch another round of Interim Scheme to Extend the HOS Secondary Market to White Form Buyers in the second half of 2015 to allow 2 500 eligible buyers (including young people) to purchase HOS flats with premium not yet paid under the HOS Secondary Market Scheme, so as to meet their home ownership aspirations.
Apart from the HA, the Hong Kong Housing Society (HKHS) also takes part in the construction of subsidised sale flats to provide more home ownership opportunities for the low- to middle-income families and young people. In view of the enthusiastic response to the Greenview Villa project of the HKHS earlier, the Government has earmarked a site in Sha Tin for the HKHS to develop a similar project. The project is expected to provide about 1 000 subsidised sale flats.
The Youth Hostel Scheme is coordinated by the Home Affairs Bureau (HAB). The scale, technical constraints as well as the planning and lands procedures required for each youth hostel project of different participating Non-Governmental Organisations (NGOs) vary. The relevant participating NGOs have been closely liaising with relevant departments, and HAB has been proactively providing necessary support and assistance. Currently, the project of the Tung Wah Group of Hospitals (TWGHs) in Sheung Wan and the project of the Hong Kong Federation of Youth Groups (HKFYG) in Tai Po are progressing well. Pre-construction consultancy studies for the two projects have been completed, and various planning, lands and funding application procedures are in the pipeline. As for the other two new projects announced earlier (namely the project of the Hong Kong Association of Youth Development (HKAYD) in Mongkok and the project of the Hong Kong Girl Guides Association (HKGGA) in Jordon), the pre-construction consultancy studies are being prepared. Upon completion of the relevant steps, HAB will seek funding approval from the LegCo Finance Committee and provide further details of individual projects.
Details of the four projects are set out in Table 3.
Meanwhile, the Government has been liaising closely with other interested NGOs according to the policy objectives of the Youth Hostel Scheme, with a view to assisting them to launch more projects.
Ends/Wednesday, December 17, 2014
Issued at HKT 14:58