Speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, at the Budget Debate


Following is the speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, at the Budget Debate today (April 28):




During the Council's Budget Debate last week, a number of Members expressed their views on housing policy. I would like to give an overall response in the following paragraphs.


Implementation of Housing Policy


I believe that the majority of people have accepted the Government's position as enshrined in the Statement on Housing Policy delivered in late 2002. At the time we made it clear that the Government will minimize its intervention in the market so as to maintain a fair and stable environment to enable the property market to resume its healthy development. The public also agree that the Government's role is mainly to provide public rental housing for families in need. The community expects the Government to maintain a clear, comprehensive and consistent housing policy to restore the confidence of the public and investors in the property market. As revealed by statistics for the past few months, the property market is beginning to pick up, the number of negative equity cases is on the decrease, and the public and investors have regained confidence in the property market. The repositioned housing policy begins to show effects.


Land Supply and the Application List System


Since 2004, in line with the market-led principle, the supply of land has been triggered through the Application List System. Recently, two sites on the List, in Sha Tin and Ma On Shan respectively, have been successfully triggered for public sale. As the total upset price for the two sites accepted by the Government exceeds $1.6 billion, some Members queried the estimate in the Budget that land sale revenue would only come up to $4.5 billion.


Land sale revenue was estimated at $4.5 billion because quite a number of sites on the Application List would only be offered for application in the latter half of the 2004/05 financial year. We expect that if these sites are successfully triggered for sale and, after completing the land sale procedure, the revenue will only be received and credited in the 2005/06 financial year. For these reasons and in view of the latest developments in the property market, it is understandable that some might consider our estimates to be too conservative.


On the other hand, some in the market are concerned that the supply of land may be affected by the low success rate in triggering a land sale, and this may lead to disruptions in the supply of residential flats in future. The Hon Abraham SHEK Lai-him has also expressed concern about this. I would like to point out that the Application List System is a market-led mechanism in which the market determines flexibly when the sites and how many of them are offered for sale. The upset price for the land sale is also determined according to market price. This mechanism ensures a continual supply of land to meet market demand and to avoid any disruption. Moreover, the Application List is not the only source of land supply. Developers may change the use of their land for permissible development through lease modification.


The Hon LAU Ping-cheung has said that the Government should provide more small sites for application to make it easier to trigger a land sale. The Application List, as announced this January, comprises 14 pieces of residential sites and nine of them have an area of less than one hectare. These smaller sites should be able to meet the needs of small and medium developers. Whether a land sale can be successfully triggered ultimately depends on the commercial decision of developers and whether the upset prices offered by them meet the expectation of the Government.


Supply of Residential Flats


We have been closely monitoring the supply of private residential flats. According to latest information, it is estimated that around 26 000 new units will be completed this year and around 23 000 units in 2005. For 2006 and 2007, as our forecast currently stands, the estimated supply will be about 16 000 and 7 000 respectively. I must emphasize that these figures reflect only the production of flats generated from private residential development projects under construction and sold sites and do not represent the actual supply in each of the coming four years. The actual supply in future will be affected by the following two factors.


The first is the amount of unsold housing stock accumulated from previous years. The number of unsold completed flats has been on the decrease since our analysis of the supply of residential flats last July, reflecting an increasing take-up rate and a corresponding improvement in the imbalance between supply and demand of residential flats.


Second, we must take into account the new private residential flats which will be built any time between now and 2007. While I am sure that there will be continuous supply of flats, the actual amount of production is ultimately up to the market and the developers, who will decide on the timing and amount of production after careful assessment of latest market information. This process will be dictated by market forces. The Government's responsibility is to ensure an adequate supply of land to meet market demand and the requirements for long-term housing development of the community, with the aim of maintaining a reasonable balance between supply and demand of residential flats.


Disposal of Surplus Home Ownership Scheme (HOS) Flats


In the interest of consistent implementation of housing policy and to restore the balance between supply and demand in the property market, the Housing Authority has decided earlier not to put up for sale unsold and returned HOS flats in the form of subsidized housing before the end of 2006. We are also examining practicable options to dispose of those HOS flats which have never been put up for sale by changing their use. The Hon IP Kwok-him has suggested transferring the surplus HOS flats to staff quarters for the disciplined services and selling them orderly to existing public rental housing tenants. I fully understand the concern of Members and the public and am grateful for Members' suggestions on the disposal of the surplus flats. In fact, we have studied various disposal options in a positive and open manner, in particular the suggestion of transferring the HOS flats to staff quarters for the disciplined services. Our discussions with the government departments concerned have reached the final stage. Besides, we also intend to transfer another 3 000 flats to public rental housing. The Housing Authority will discuss the proposals in due course.


Regarding the suggestion to sell HOS flats to public housing tenants, although the private property market is becoming stable, we will continue to monitor closely the supply and demand of residential flats and to avoid impacting on the property market which has just begun to revive. On this premise, the Housing Authority will from time to time review the timetable for disposing of the unsold and returned HOS flats.


Home Assistance Loan Scheme


In their speeches, both the Hon Selina CHOW and the Hon CHAN Kwok-keung have requested the Government to carry on with the Home Assistance Loan Scheme so as to enable first-time home buyers to purchase their own flats. In recent years, flats of different types and pricing are available in the private property market. Moreover, the loan packages and mortgage terms are also very flexible. Potential home buyers can choose properties meeting their requirements having regard to their personal circumstances and affordability. Housing loans provided by the Government is a form of market intervention. The main thrust of our housing policy is to make maximum use of market forces to determine supply and demand for flats, while focusing public resources in the provision of public rental housing. In line with this important principle, we consider it necessary to conduct a comprehensive review of the Home Assistance Loan Scheme. We will put forward our recommendations to the Housing Authority shortly.


Building Management and Maintenance


Proper building management and maintenance is essential to the sustainable development of Hong Kong. The public consultation on "Building Management and Maintenance", which lasted for three and a half months, just closed in mid-April 2004. During the consultation period, we consulted the 18 District Councils and attended over 20 consultation fora with the industry and the public. Around 130 written submissions were received. I am grateful to the public, in particular Members of this Council, for actively expressing their views.


We are now analyzing the views received. Meanwhile, I am pleased to report to Members some preliminary analysis on the mainstream views. The views received point to a community consensus on the need to take timely action to address the building neglect problem. Many owners and members of Owners' Corporations have indicated their willingness to take up the responsibility for managing and maintaining their buildings, and at the same time hope that the support rendered to them can be further enhanced to facilitate the discharge of their duty. There are also suggestions on placing certain mandatory requirements on owners as a long-term measure to ensure proper building management and maintenance.


Our initial idea is to invite, subject to the availability of public resources, non-Government organizations (NGOs) to provide appropriate support and assistance to the old and vulnerable owners living in dilapidated buildings. Some examples of possible assistance include organizing the owners to form Owners' Corporations, helping them in appointing contractors for undertaking maintenance works, and providing technical support to owners on building management and maintenance matters in conjunction with relevant professionals. The NGOs may also refer owners who are in genuine need to relevant Government departments so that their living quality and building condition can be improved through social welfare measures, public housing resources and the Building Safety Loan Scheme, etc. The involvement of NGOs would help organize the owners in these buildings and give them the necessary assistance. This would facilitate the industry to provide the required management and maintenance services to these owners direct in the long run. We will explore the feasibility of this approach with NGOs and the industry shortly, and will consider introducing a pilot scheme in this regard.


Public views received are divided on what concrete measures should be put in place to facilitate or mandate owners to undertake building management and maintenance. Suggestions raised include mandatory building inspection, mandatory engagement of building management companies and mandatory formation of Owners' Corporations. Since this subject concerns our community at large, we will examine closely and carefully the implications of any mandatory measures.


We will work out a clearer way forward in the coming months and thereafter consult relevant parties on various options. We will consult the public again before finalizing any further proposals.


Thank you, President.


Ends/Wednesday, April 28, 2004