Following is the translation of the speech by the Secretary for Housing, Planning and Lands, Mr Michael Suen, at the Legislative Council meeting today (April 27) for the second reading debate of the Appropriation Bill 2005:
Hong Kong's private residential property market has made continued recovery for more than twenty months, and is now back to the track of healthy development. Property trading is active and the negative equity situation has also greatly improved with the recovery of the property market. While the buoyant market has generated general optimism among the public and investors about the prospect of the property market, some consider that the high-end property market is beginning to become overheated and are worried that bubbles may develop. Indeed, the high-end property market has been rather active recently, while the medium and low-end markets are still adjusting steadily. Home buyers should carefully take into account their own needs and afford ability when making decisions on property investments. They should not just set eyes on the atmosphere of the high-end property market without paying attention to the actual situation of the overall property market and socio-economic conditions. That said, it is of course very important that the confidence of the public and investors is restored in the property market in the long run, as this can help the market develop steadily and healthily, as well as enhance Hong Kong's economic outlook.
Supply of Private Residential Flats
Apart from the concern about an overheated high-end property market, some market analysts have also expressed the concern that with the decrease in the production of new flats, there may be a shortage of flat supply in the following one to two years.
All these concerns center around the supply and demand of flats. As a matter of fact, the Government has devised a database system to monitor private residential development projects for a close look at the housing supply. Last week, the Government released the latest figures of residential flats under construction. The number of residential flats under construction in the first quarter of 2005 is 3 500, which has dropped compared with the 5 400 flats in the same period last year. On the surface, it seems to aggravate the worry that there will be a shortage of flats in the market. However, the number of residential flats under construction does not fully reflect the picture of the supply of new flats. Since the serious over-supply previously in existence in the property market has yet to be absorbed completely, we should look at the supply of flats from a broader perspective. In fact, our statistics show that the supply of private residential flats in the next two to three years is still abundant. The flats come under the following four categories:
1. the approximately 41 000 units currently under construction;
2. the approximately 15 000 completed but unsold units;
3. the approximately 8 000 residential units that can be built on residential sites
for which premium has been paid or lease modifications have been completed; and
4. the approximately 5 000 residential units that can be built on sites sold by the Government last year, the construction of which will soon commence.
The above add up to about 69 000 flats. In addition, the Housing Authority (HA) has a current stock of more than 16 000 returned and unsold Home Ownership Scheme (HOS) flats, which will be offered for sale in an orderly manner from 2007 onwards.
Of course, the supply of private housing in the longer term hinges on how the developers view the market in future. Different developers have different development strategies and respective projections on market demand. They hold different views on the best and the most cost-effective proposals on the number of residential flats to be built in future. If we are convinced that the market-led approach works best, we should trust the market and let the market make the decision. It is the Government's responsibility to monitor market conditions and provide adequate land to satisfy market demand.
Ensuring Adequate Land Supply
Developers may acquire land for residential development through various channels. To sum up, future land supply comes from the following four sources:
First, the Application List for 2005/06 offers 35 pieces of land for application, 29 of which are residential land that can provide over 10 000 flats. These sites provide a wide range of choices in terms of size, district and scale of development;
Second, it is anticipated that the two railway corporations will proceed orderly with the tendering of their residential development projects along the railways involving more than 20 000 flats in 2005/06;
Third, the redevelopment programme of the Urban Renewal Authority (URA) will supply an average of over 1 000 flats each year; and
Fourth, the residential sites for which premium is under negotiation or lease modification is being processed. The actual amount of land supply will depend on the progress of negotiation.
In view of this, the supply of residential land will by no means be inadequate in the next few years. As to whether there will be an abrupt shortage of new flats, it depends on the amount of residential land to be absorbed by the market in the end which will be subject to the assessment of the market demand by developers on which they make their business considerations and development plans. Our policy is to ensure that there is adequate supply of land under any circumstances.
Policy on Resumption of Sale of Surplus HOS Flats Remains Unchanged
On HOS just mentioned, I understand that Members are concerned about the latest situation in regard to HA's disposal of the surplus HOS flats. Recently, some public figures and some Members have suggested the resumption of the sale of HOS flats before 2007. However, views are divided on this subject and there is no consensus in the society. While some people expect the Government to advance the sale of the HOS flats in the midst of a buoyant market, some are worried that it may affect the stability of the market and undermine the predictability of the housing policy. Notwithstanding the recovering property market, for the thorough implementation of the re-positioned housing policy, I want to re-affirm that the decision of suspending the sale of the surplus HOS flats until the end of 2006 will not change.
Market-led Land Policy
Over the year, the active property market has aroused public concern over the shortage of land supply, and the Government has thus been asked to resume land auctions on a regular basis to supplement the Application List system. On this, I want to point out that the Application List system has provided a market-led mechanism that can decide the timing and amount of land to be put on sale in a flexible manner. The system also provides transparency, consistency and predictability to the real estate industry and market participants. We therefore have no intention to make any change. Furthermore, the operation of the Application List will be reviewed from time to time to ensure that it can meet the needs of the market. As such, we have introduced a number of streamlining measures with a view to improving the operation of the Application List.
On land policy, I want to respond to the concern expressed by some Members over land management, in particular the system of land grant by way of private treaty. It should be noted that this method of granting land has been in use for a long time for achieving specific policy objectives. Such land grant is subject to the approval of the Executive Council or the delegated authority in accordance with the criteria approved by the Executive Council. In response to Members' concern, the Government has proceeded to review the handling of applications for lease modification submitted by lessees of land granted by private treaty, to change the land uses in achieving the changed planning intentions. It is hoped that some improvement measures can be identified. Of course, we cannot expect that the findings of the review will be available within a short time. I, however, believe that Members will work together with us towards the common goal of further enhancing the system.
Building Management and Maintenance
Furthermore, I would like to speak on our work on the building management and maintenance front. We have formulated a comprehensive and systematic strategy to tackle the long standing and complex building neglect problem through various short and medium-to-long term measures. We have solicited the support of the Hong Kong Housing Society to launch a $3 billion "Building Management and Maintenance Scheme" in February this year to provide immediate "one-stop" assistance to owners of old buildings, guided by the public preference for mandatory building inspection, we plan to launch a second stage public consultation exercise by the end of this year to engage the community on the implementation details of the mandatory building inspection scheme and various support measures. Subject to a general community consensus on the major implementation details of the scheme, we intend to introduce the relevant legislative proposals to the LegCo in 2006, with a view to putting in place a long-term solution to the building neglect problem. We are now examining the implementation details for mandatory building inspection and various support measures, including identification of target buildings, setting inspection standards, establishing an independent arbitration mechanism, considering the setting up of a voluntary building classification scheme and providing appropriate assistance to owners in genuine need in discharging their responsibility. We are in discussion with the industry over the preliminary proposals and will follow up accordingly.
Members have also requested expediting the pace of urban renewal. The URA is continuing its holistic approach to urban renewal by integrating actions to redevelop dilapidated buildings, rehabilitate poorly maintained buildings, revitalise older districts and preserve buildings with architectural or historical significance within its project areas. Since its establishment in 2001, the URA has steadily commenced 22 redevelopment projects, undertaken revitalisation initiatives in various districts, and put in place a building rehabilitation programme. To further expedite the pace of urban renewal, we are working closely with the URA to review the Urban Renewal Strategy (URS), covering amongst others, an examination of the relative emphasis of various aspects of urban renewal work. We would consult the public on proposals to revise the URS.
Finally, I am thankful to Members for their valuable opinions on the work areas of my bureau, and I hope my response just now can help Members understand more our policy directions and our work progress so that we can take forward our work in hand on the foundation of mutual trust. Thank you, Madam President.
Ends/Wednesday, April 27, 2005