MR CHAN KIN-POR (in Cantonese): Deputy President, the soaring property prices have long been detached from the real economy. Ordinary people can hardly afford to buy their own homes. There are two major root causes leading to the current situation. First, the extremely low interest rate environment, which has persisted for a long time in Hong Kong, has attracted huge capitals from local and Mainland investors into the property market, resulting in an increase in property prices. As property prices keep rising, more and more people want to buy properties. Consequently, an irrational exuberance in the property market has prompted the Government to introduce “curb” measures repeatedly in order to suppress the demand. Under the linked exchange rate system, the interest rates of Hong Kong have to move in tandem with those of the United States. We indeed can do nothing on this front other than waiting for the United States interest rates to be normalized.
The second root cause is insufficient land supply. Over the past 20 years, drastic fluctuations in the property market of Hong Kong have been followed by constant changes in land supply. In the wake of the financial crisis back then, property prices had plummeted. The Government thus decided to impose a moratorium on land sale and introduce the Application List system to stabilize the property market. It appears to be very appropriate to take unusual steps at unusual times. However, the worst thing is, after the property market has been stabilized, the Government has been dragging its feet on resuming land sale and land development, resulting in the grave consequences of today. To resolve the issue, it is essential for us to tackle the problems at root.
Data in 2009 had already suggested that the moratorium on regular government land sale for years would reduce the supply of residential flats to fewer than 10 000 per year. At that time, Mr CHAN Kam-lam, Mr Jeffery LAM and Mr Abraham SHEK and I had a discussion with then Chief Executive Donald TSANG, who had also sent officials to meet us. We had presented the data and urged the Government to squarely face the problem of insufficient land supply. For details, please refer to the press releases back then. However, the Government had not taken any action, thus missing the opportunity to take timely remedial measures. We should learn a lesson from that. No matter how the property market will fare in the future, the Government should stick to its long-term policy to maintain stable land supply instead of adopting wavering policies. Even in the event of such an extreme situation as the financial crisis, land supply should not be suspended. Land development should continue even if a moratorium on land sale is implemented.
In fact, housing demand from the community is determined by numerous factors. Even the “curb” measures introduced by the Government can only partially suppress the demand. The Government can only completely grasp the market situation by maintaining a stable land supply. To resolve housing problem in the long run, the top priority is to maintain a sufficient supply of land.
Recently, the Development Bureau published the “Hong Kong 2030+: Towards a Planning Vision and Strategy Transcending 2030”, outlining the planning for long-term land supply. In my view, this initiative is a move in the right direction. I think that reclamation in areas other than Victoria Harbour can help increase land supply in the future.
Speaking of “curb” measures, I agree that unusual moves should be taken at unusual times. However, as manifested in their current implementation, “curb” measures can only be regarded as a short-term initiative to suppress demand. As a free economy, Hong Kong should resolve the problem by increasing land supply. Given the free economy upheld by Hong Kong, the problem should be resolved by increasing land supply. The “curb” measures currently implemented can significantly suppress demand, thus freezing up the secondary market. Some Members even suggested just now the introduction of capital gains tax, vacant property tax and even tenancy control. However, all these measures will distort the market and create a lot of side effects which are inconceivable at this stage; such measures absolutely cannot resolve the problem.
When it comes to the problem of public housing, I have suggested many years ago to follow Singapore’s practice in the long run. We certainly are not going to replicate their practice of providing Housing and Development Board (“HDB”) flats as Hong Kong does not have the resources to provide public housing to over 80% of residents. At present, 30% of local residents live in public rental housing (“PRH”) units and 17% in Home Ownership Scheme (“HOS”) flats. In other words, 47% of Hong Kong residents are living in public housing. We can set a target to gradually increase the proportion to 55% to 60% in order to allow more citizens to live in public housing. Some people may consider it utterly impractical to propose setting a higher target given the insufficient land supply and long waiting time for PRH units. However, this approach will become feasible if market supply keeps increasing and land supply becomes more abundant. While the suggestion involves huge investments, it is very much worthy of further exploration because it can help stabilize the community and alleviate public grievances.
Despite the numerous problems, we still have to rise up to the challenges. If we do not show our determination, the current vicious cycle will just repeat itself. It is only the general public who will suffer. I so submit.