LCQ6: Land Supply
Following is a question by the Hon Frederick Fung and a reply by the Secretary for Development, Mrs Carrie Lam, in the Legislative Council today (January 18):
In response to my question on anti-property speculation measures earlier, the authorities stressed that they would maintain their efforts in combating short-term speculative activities to ensure the healthy and stable development of the property market, and that in the long run, they would increase land supply to tackle the housing issue. However, according to the fourth-quarter Land Sale Programme of this financial year announced earlier, the Government has only selected five residential sites and one commercial site from the Application List for sale by tender, and the five residential sites will only supply a total of about 430 flats, representing a substantial reduction of 75% when compared with the 1,770 flats supplied in the previous quarter. Although the authorities explained that the annual target of supply had already been met, some academics consider that increasing land supply is the long-term policy to stabilise the property market, and land supply should not be reduced even if the annual target of supply has been met. In this connection, will the Government inform this Council:
(a) of the factors considered by the authorities and their justifications for deciding whether land sales should be initiated by way of tender or public auction; whether in the past the authorities have studied and compared the differences between the two ways, including conducting analyses on the transaction prices, market response and effectiveness, etc.; if they have, of the results;
(b) in deciding on the fourth-quarter Land Sale Programme of this financial year, whether the authorities have considered the factor that a drop in property prices may be triggered by economic slowdown in the future; whether they have assessed if the substantial reduction in the number of flats which may be built on the residential sites supplied by the Government will convey a wrong message to the market and the public, causing them to suspect that the Government is boosting the market or its determination to combat property speculation is shaken; how the authorities will respond to such market and public conjecture; whether the authorities will make clear their determination to increase land supply in the new financial year; and
(c) whether it has assessed how the increasing risk of external economic recession and the influence of property-related industries will affect the Government's short-term and medium-term policy on land supply; if it has, of the results; whether the authorities will thus suspend or adjust the measures on combating property speculation, ensuring transparency in the property market and preventing excessive expansion in mortgage lending, and whether the long-term policy of tackling the housing issue by ways of expanding land resources and increasing land supply will also be affected?
Just as the Government reiterated in its reply to the Hon Frederick Fung's written question on December 21, 2011, the Government has been monitoring developments in the private residential property market closely and remains vigilant on the risks of a property bubble. Since 2010, the Government has been responding to the situation through the introduction of long, medium and short-term measures in four areas, including increasing land supply, combating speculative activities, ensuring the transparency of property transactions, and preventing excessive expansion in mortgage lending, with a view to ensuring the healthy and stable development of the property market. The Hon Fung's question raised today targets at the area of land supply.
Since 2010, we have fine-tuned the measures of selling government land by taking the initiative to sell land through public auction or tender. Starting from 2011, while retaining the Application List System, the Government has been selling land in a proactive manner and announcing land sale programmes in advance on a quarterly basis to increase housing land supply. In the current financial year up to January 13, 2012, a total of 21 residential sites that could provide about 6,300 flats in total have been sold. Of them, only one small site was successfully triggered by developer and the remaining were initiated for sale by the Government. In the remainder of the current financial year, there are one residential site in Tuen Mun being tendered and five residential sites announced for sale in the fourth quarter which could provide an addition of about 1,500 flats. Furthermore, through West Rail property development projects at Nam Cheong Station and Tsuen Wan West Station TW 5, redevelopment projects of the Urban Renewal Authority (URA), projects subject to lease modification/ land exchange, and private redevelopment projects not subject to lease modification/land exchange, the private residential flats that could be provided by the total land supply is estimated to have exceeded 20,000, meeting the working target that in the next 10 years on average land needs to be made available annually for some 20,000 private residential flats as mentioned by the Chief Executive (CE) in his 2010-11 Policy Address.
However, I must point out that the working target of making land available annually for some 20,000 private residential flats on average in the next 10 years refers to the housing land that could be supplied to the market for private residential developments within a certain timeframe. It is not a target of private residential flat production. The actual supply of housing land supply will depend on market factors, such as the results of government land sales, tenders of railway property development projects and URA's redevelopment projects, as well as developers' initiative to modify leases and redevelop projects, etc.
My reply to the three parts of the question is as follows:
(a) All along, the Government normally sells land through open tender or public auction. When deciding on the appropriate means of land sale, the Government considers relevant factors such as market conditions, characteristics of individual sites and land sale conditions, etc. However, whether by way of tender or auction, both are fair, just and competitive means of land sale. In fact, sites for railway property development projects and URA's redevelopment projects adopt the means of tender.
All sites differ in location, size, surrounding environment, land sale conditions and market attractiveness, etc., and they are sold by way of either public auction or public tender. Under such circumstances, the Government is unable to do meaningfully studies on and analyses of individual sale sites to compare the differences between the two sale means in respect of the transaction prices and market responses, etc. of the sites concerned.
(b) I understand that under the arrangement of announcing quarterly land sale programmes, the public will inevitably compare them and speculate just as the Hon Fung raised in the question. Since the flat supply quantity in the land sales for the fourth quarter in the current financial year is less than those for the previous three quarters, I went into length to explain the land sale arrangement to dispel the public's worries when announcing the land sale programme for the fourth quarter on December 21, 2011. My speech that day is largely as follows.
First, in the first three quarters of the current financial year, the supply of housing land from different sources to the market could provide about 20,000 flats, basically meeting the working target set by the CE that on average land needs to be made available annually for some 20,000 private residential flats. On the other hand, the Financial Secretary will unveil the 2012-13 Budget on February 1, 2012 in which he will mention the salient points of the forthcoming Land Sale Programme. I will normally, soon afterwards, announce the new annual Land Sale Programme, which will normally supersede the previous Land Sale Programme and come into effect on the day of the press conference without waiting until the commencement of the new financial year on April 1.
Furthermore, there would be four sizeable sites for sale by tender in January and February 2012, including one Tseung Kwan O site whose tender would close in early January, one Tuen Mun site whose tender would close in early February, and the two TW 5 projects at Tsuen Wan West Station whose tender would close in January. Based on these considerations, I indicated that we could have put an end to the 2011-12 Land Sale Programme; but in order to supply land in a continual and stable manner, especially sending this clear message to the market and the public, we still decided to sell land in the fourth quarter of 2011-12, i.e. to sell five residential sites in January to March this year.
Regarding the land sale in the fourth quarter, I wish to supplement that the 2011-12 Land Sale Programme announced in February 2011 includes, apart from the Application List, five residential sites with flat size restrictions on the Sale by Tender List. Two sites located in Tsuen Wan and Yuen Long respectively which could provide 1,500 flats were originally intended for sale in the fourth quarter of 2011-12 when ready, but were re-allocated for the purpose of the new Home Ownership Scheme pursuant to the CE's Policy Address announced in October last year.
Therefore, the Government does not intentionally reduce housing land supply in the land sale arrangements for the fourth quarter of the current financial year. On the contrary, we will increase land supply in a continual and stable manner so as to ensure the healthy and stable development of the property market.
As for the 2012-13 Land Sale Programme asked in the question, the Financial Secretary and I will announce the details next month. I am unable to disclose such information at this juncture. However, the Government's determination to increase land supply remain firm.
(c) As I pointed out above, the Government has been monitoring developments in the private residential property market closely and remains vigilant on the risks of a property bubble. At present, such monitoring has not entailed the adjustment of our work on land supply. As for the "influence of property-related industries" mentioned by the Hon Fung, I am not clear what it is about. However, housing land supply aims to meet the community's demand for private housing and ensure the healthy and stable development of the property market.
In fact, in response to some speculative reports, the CE reiterated on December 9, 2011 that the Government would continue to combat short term speculative activities and implement a host of other measures to ensure that the property market would remain healthy and stable. The Government would review theses measures as and when necessary, but the said mechanism is not activated in the meantime.
In respect of land supply, the CE has indicated that we will continue to increase supply through different measures to meet demand. Our determination and efforts on land expansion will not be affected by economic cycles and property market fluctuations. Our aim is to ensure an annual supply of land for an average of about 40,000 residential units of various types. When demand for land declines, land development will continue. The newly developed land will be kept in the Government's land reserve and made available when appropriate. By doing so, we will be able to supply sufficient land for more than 40,000 units each year when demand rises.
Ends/Wednesday, January 18, 2012
Issued at HKT 17:00