Housing is our No 1 social concern and the government’s top priority. Both housing prices and rents have soared over the years in Hong Kong, making housing increasingly unaffordable for the general population, especially the working poor.
Following wide public consultation, the government announced its Long Term Housing Strategy in December 2014, with a 10-year rolling target of new housing supply based on holistic demand assessment. The latest 10-year supply target, for 2017/18 to 2026/27, remains at 460,000 new units, of which 200,000 are public rental housing and 80,000 subsidised sale flats.
The serious supply-demand imbalance has to be addressed on both sides.
In 2010, the previous government introduced a special stamp duty to discourage short-term speculation. This term, we enhanced this duty, and introduced a buyer’s stamp duty in October 2012 to curb non-local purchases. Meanwhile, the Monetary Authority has implemented several rounds of macro-prudential measures for property mortgage loans. In February 2013, the doubled ad valorem stamp duty was introduced for all property transactions, targeted at those who are not Hong Kong permanent residents, as well as permanent residents who already own a residential property here.
Both the special stamp duty and the buyer’s stamp duty have been effective. By this October, only 1.8 per cent of total residential property transactions involved purchases by non-local individuals and non-local companies, much lower than 4.5 per cent before the introduction of the buyer’s stamp duty (January to October 2012).
Despite the market cool-off, however, housing prices rose by 3 per cent month-on-month in September, then by another 2.6 per cent in October, getting very close to the peak price level in September last year. Alarmed by the risk of another round of market exuberance, we raised the ad valorem stamp duty for residential property transactions last month to a flat 15 per cent, while retaining the existing exemption for permanent residents who do not own any other residential property in Hong Kong.
The government’s policy objectives are clear: increase public housing supply to assist our grass-roots and low-to-middle-income households; give priority to home ownership for Hong Kong permanent residents; and stabilise the private housing market. To help us understand our housing supply situation, let me address three often-asked questions.
● Are many flats being left vacant while people scramble for housing?
Statistics speak for themselves. Annual surveys by the Rating and Valuation Department show that the vacancy rate of private housing dropped from 4.3 per cent in 2012 to 3.7 per cent in 2015, significantly lower than the 20-year average of 5 per cent during 1994-2015. New housing units are being snapped up quickly. The vacancy rate of public rental housing is only 0.5 per cent.
When housing prices and rents remain high, many are turning to public rental housing. As at September this year, there were 152,500 general applications (meaning families and single elderly people), while another 134,000 were in the queue for non-elderly single people, two-thirds of whom were aged 35 and below. That is why the Housing Authority, apart from speeding up new housing projects amid growing local resistance, is now also critically examining how limited public housing resources can be better allocated to those with more pressing needs. All these point to the need for more supply, not an excess in supply.
● What is being done to increase supply?
The main constraint on supply is the availability of “developable” land. The government adopts a multipronged approach to increase land supply in the short, medium and long terms. Right now, we are still short of land to fully achieve the 280,000 public housing supply target over the next decade. To speed up supply, we seek room to increase development intensity where planning conditions permit, review land use and rezone land.
Brownfield sites are an important supply of land. However, such sites are often intermingled with existing villages, squatters, unauthorised structures, farmland, and so on, and infrastructure on the land is limited for high-density development. The government has to carry out studies to determine technical and planning feasibilities.
The Housing Authority conducts a range of technical, environmental, traffic and community impact assessments in order to reassure the local communities who are concerned about population growth. Ancillary community facilities are provided together with some large-scale housing developments. Still, we are often unfairly accused of “reckless” development.
In the medium to long term, the government strives to achieve new land supply through new development areas, and reclamation outside Victoria Harbour. The recent “Hong Kong 2030 Plus” study report proposes developing strategic growth areas, including an Eastern Lantau Metropolis. We need to build up a developable-land bank so as to cater for new housing needs as well as our community’s aspiration for more spacious homes.
With sustained efforts, the projected first-hand private residential property supply in the coming three to four years is 93,000 flats. In the coming five years, about 94,500 public housing units will be produced. Despite steady progress, production is still falling behind the increasing demand. The number of public rental housing applications has grown by some 44 per cent since this government assumed office in mid-2012.
To underscore the government’s financial commitment to building more public housing, it set up a Housing Reserve in 2014, with capital injections plus interest now accumulating to HK$74 billion.
● Finally, couldn’t we build faster?
The hard fact is that in public housing, we have virtually used up all “spade-ready” sites in hand. Indeed, some 80 per cent of the sites processed in the past few years are not spade-ready. These sites are subject to uncertainties of the various statutory and non-statutory processes, including the complications in technical and impact studies, time required for informal and formal consultations, large number of representations to the Town Planning Board, local objections and, occasionally, even judicial challenges.
Land resumption and clearance, as well as the need to reprovision existing community facilities, add to the complications. More often than not, affected local communities are not pleased with the added population density. We have been working hard to address their concerns and maximise production for each and every project. We also have to cope with the shortage of construction labour.
Hong Kong does face serious challenges in making housing more affordable. But let’s face it – there is no painless solution to the housing problem, here and elsewhere. We need land in order to build, and it requires the efforts of the whole community to overcome the planning and political hurdles of our ambitious housing projects.
It is so easy to say “no” and so hard to say “yes” to individual housing projects in Hong Kong these days.
We need to have the courage to accept trade-offs. If we keep beating around the bush and refusing to tackle the root of the problem – namely, supply – we are simply aggravating the misery of those living in poor conditions such as subdivided units.
Professor Anthony Cheung Bing-leung is secretary for transport and housing