LCQ2: Measures to address demand for housing
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Question:
Quite a number of members of the public have complained to me that subsidised housing has been persistently in short supply, leaving them no choice but to live in rented private residential units and pay high rents while waiting for allocation of such housing. Despite the implementation of a series of demand-side management measures by the Government targeting the residential property market in recent years, residential property prices have repeatedly hit record high and, like a rising tide that lifts all boats, the rents have also risen incessantly. In this connection, will the Government inform this Council:
(1) of the respective expected numbers of public rental housing estates and Home Ownership Scheme courts which will be ready for intake in the coming nine months, and set out in a table the names of the housing estates and courts, the districts in which they are located, the numbers of flats to be provided and intake dates;
(2) whether it will introduce new demand-side management measures in the coming six months to bring down residential property prices and rents; if so, of the details; if not, how the authorities address the public demand for housing; and
(3) given the current short supply of subsidised housing, whether the authorities will consider afresh implementing a rent control scheme; if so, of the implementation timetable; if not, what more effective measures the authorities have in place to alleviate the rent burden on the public?
Reply:
President,
My reply to various parts of the question raised by the Hon Leung Kwok-hung is as follows:
(1) According to the Public Housing Construction Programme of the Hong Kong Housing Authority as at end-March 2017, there will be a total of about 7 000 public rental housing (PRH) units and 1 819 units under the Home Ownership Scheme (HOS) / Green Form Subsidised Home Ownership Pilot Scheme (GSH) available for intake in the coming nine months (i.e. from June 2017 to February 2018). Details are set out at Annex.
(2) The Government has repeatedly emphasised that the crux of resolving the housing problem lies with increase in supply. To address the demand-supply imbalance at source in the long run, the Government has strived to increase the housing land supply through short, medium and long-term means under the supply-led strategy. Through sustained efforts of the Government, private housing supply has increased steadily. As at end-March 2017, the projected supply from the first-hand private residential property market for the coming three to four years is approximately 96 000 units, a record high since the first release of the quarterly statistics on the supply of first-hand private flats in September 2004. On completion, based on the preliminary assessment of private residential developments known to have started or to be started on disposed sites, the private sector will, on average, develop about 20 300 private residential units each year in the next five years, 70 per cent higher than the yearly average of the past five years.
Nevertheless, as it takes time for the increase in supply to realise, the short-term demand-supply balance remains tight. Owing to the ultra-low interest rates and abundant liquidity in the global monetary environment in view of the easing monetary policies adopted by many major economies, the local residential property market has been exuberant with property prices out of line with economic fundamentals and heightened risk of a bubble. Against such background, it is necessary for the Government to continue with various demand-side management measures in combating speculative activities, curbing external demand and reducing investment demand, thereby minimising the risk of a housing bubble.
The Government announced the introduction of the New Residential Stamp Duty (NRSD) measure on November 4, 2016 to increase the ad valorem stamp duty chargeable on residential property transactions to a new flat rate of 15 per cent. The new measure increases the transaction costs, thereby reducing investment demand for residential properties, which in turn helps guard against further increase in the risks of a housing bubble. According to statistics of the Inland Revenue Department, since the announcement of the new measure, the number of residential property transactions involving Hong Kong permanent resident (HKPR)-buyers who have owned one or more local residential property (which can be regarded as an indicator of investment activities) has decreased from about 1 800 cases in November 2016 (reflecting the situation before introduction of NRSD) to the monthly average of 340 cases during the period from January to April 2017, representing a significant drop of 80 per cent. In addition, amongst residential property transactions involving HKPR-buyers, the percentage of buyers who do not own any other residential property in Hong Kong at the time of acquisition reached 94 per cent on average during the period from January to April 2017, much higher than the relevant percentage of 70 per cent in November 2016.
After the introduction of NRSD measure, there has been public concern over the increase in transactions involving acquisition of multiple residential properties under a single instrument in recent months. Against such background, the Government announced on April 11, 2017 to tighten the exemption arrangement for HKPRs under the NRSD regime with effect from April 12, 2017, so as to prevent local buyers from making use of the above exemption arrangement to avoid the payment of NRSD. Under the tightened exemption arrangement, if a HKPR-buyer acquires more than one residential property under a single instrument, the transaction concerned will no longer be exempted, and will be subject to the NRSD rate of 15 per cent. The Government will continue to stay vigilant and closely monitor the property market movements and the ever-changing external conditions by making reference to a series of indicators, including property prices, home purchase affordability ratio, transaction volume, flat supply, changes in local and global economies, etc., and will adjust the demand-side management measures as and when appropriate.
(3) Rent control is highly controversial and consensus has not yet been reached in the community over this issue.To this end, the Government conducted a detailed study on the issue of tenancy control in 2014 by looking into Hong Kong's past experience and overseas experience in implementing tenancy control measures, and briefed the Panel on Housing of the Legislative Council in detail in July 2014 (Note). After extensive public consultation, the Government also elaborated on this subject in the Long Term Housing Strategy (paragraphs 6.15-6.18) announced in end-2014.
Empirical findings, both local and overseas, suggest that tenancy control measures often lead to an array of unintended consequences, including those detrimental to the tenants whom the measures seek to assist. These unintended consequences include reducing supply of rented accommodation; encouraging landlords to be more selective about their tenants, thereby limiting access to adequate housing by those with unstable financial means (e.g. daily-waged workers), ethnic minorities, persons with disabilities, and other socially disadvantaged groups; encouraging certain behaviour from landlords to offset the impact of the tenancy control measures (including increasing initial rent and requiring the tenants to pay excessive miscellaneous charges, etc.); and discouraging proper maintenance of rented accommodation by landlords.
On balance, the Government considers that introducing tenancy control measures under the current tight housing supply situation will be counter-productive and will not be in the interest of the inadequately housed households and the general public. To address the problem of rent increase attributed to imbalance in demand and supply, the fundamental solution remains to be a continued increase in housing supply. The Government will endeavour to expedite the building of more public housing units (including subsidised sale flats) according to the rolling ten-year housing supply target set under the Long Term Housing Strategy, and to ensure adequate and stable supply of land for private housing. This will help stabilise the private rental level, and genuinely relieve the rent burden on the public.
Note: The relevant paper is "Tenancy Control" (LC Paper No. CB(1)1709/13-14(01)).
Ends/Wednesday, May 17, 2017
Issued at HKT 14:26
Issued at HKT 14:26
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