The housing crisis in Hong Kong: Can’t live without ‘em, can’t buy ‘em.
Data released by Hong Kong’s The Rating and Valuation Department last month indicated that the private housing index in the city rose for 21 consecutive months as of December 2017. The city’s private home prices have soared by 445% since 2003.
Answering public demands for action and aiming to cool off the hot market, the government increased the ad valorem stamp duty rates for all residential property transactions to a flat rate of 15% in 2016, on top of the buyer’s stamp duty of 15% for overseas buyers. However, prices have continued to climb along with the global trend.
Staying the course – No more, no less
With the Budget due next Wednesday, local political party Democratic Alliance for the Betterment and Progress of Hong Kong (DAB) called for a waiver of stamp duty for first-time home buyers, but Financial Secretary Paul Chan Mo-Po dismissed the possibility, saying there would not be measures that may affect the property market.
Roy Tam Hoi-pong, an activist of charitable institution Green Sense, called for a further stamp duty hike on overseas buyers, referencing a similar policy in Australia.
But Raymond Ho, Sai Kung District Councillor and founder of M107, told Harbour Times that he did not find stamp duty a good idea, citing the disappointing results of similar measures in Singapore and Vancouver.
“First of all, there is no rationale for the government to intervene the free market,” says Ho. “Second, there has been no proof that stamp duty can curb property prices. Owners of small flats cannot move to bigger ones due to the tax, hence causing a drop in the supply of second-hand flats.”
Ho explained that the drop in sales in turn caused the transaction volume in the second-hand market to plunge to 1/8 of the peak amount. Buyers are forced to turn to first-hand property market, which further drives up property prices.
Oscar O, a branch manager at Centraline, tells Harbour Times that the 15% stamp duty has scared off some Hong Kong residents that are keen on buying a second home, but had little effect on mainland home-buyers.
In a media briefing on February 17, when asked about the city’s housing problem, Mr Chan acknowledged the astonishingly high home prices, but stressed that flat supply has been increasing to meet the demand.
“Based on our estimation last December, in the next three to four years, 97,000 first-hand flats will be put on the market. Among them, over 9,000 flats are already completed and 61,000 flats are under construction. These are high numbers,” he says, adding that the number of completed flats has been rising over the recent years.
But Lawrence Poon Wing-cheung, a member of the government’s Town Planning Board and a scholar of housing policy at City University, believes that increasing land supply cannot control the city’s prices of private housing, noting that external factors such as the global economy and overseas investment influence property prices.
“But if [the government] provides more subsidised housing for sale, it can decide how much it wants to charge for such housing,” says Poon.
Critics worry that even with more subsidised housing coming on the market, many are still not able to afford a home.
The Hong Kong Housing Authority (HA) is putting a total of 4,431 flats for sale under the Home Ownership Scheme this year. Home buyers can be sold a subsidized flat for a price 30% lower from the assessed market value – a discount not generous enough by the government, according to Federation of Public Housing Estates, a local lobby group.
The Federation said the HA should increase the proportion of white form applicants from 50% to 60% to meet buyers’ demand and raise the discount rate to 40% to make homes more affordable.
The suggestion came as the prices for these government-built flats are reaching a new high since the launch of the scheme, with nearly $10,000 per square foot.
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