Harsh realities of market stymie Leung Chun-ying's housing goals
Despite the best of intentions, the administration has been unable to deliver the results it intended in terms of housing
As we are now two years into Leung Chun-ying's administration, we can take stock of what has been achieved in the city's property market.
Housing was one of the key platforms in the chief executive's election manifesto, particularly the sourcing of more residential land and delivery of more units to the market, not only to assist those who aspire to own but also to increase public rental stock.
Ultimate targets of 20,000 private sector and 25,000 public units were set as firm goals, while Leung also undertook to establish more robust long-term housing needs.
However, it appears that the realities of the real estate world in Hong Kong, the failure of the previous administration to keep pace with the city's housing and development needs, the selfishness of some members of the community and the prescriptive nature of many government processes were underestimated, so that actual implementation has been challenging, to say the least.
In addition, because of the inability to deliver new supply quickly and the unwillingness of many to wait, intervention to calm the market and deter speculation proved necessary, rationalised by a general strategy of Hong Kong homes for Hong Kong people.
So where are we today? We are edging up the target supply chain but with only 9,000 or so units completed last year and an average of 15,000 a year anticipated over the next two years, there is still some way to go to achieve the private sector target of 20,000 a year.
While the market stuttered following the introduction of the new stamp duty measures, the appetite for new product has returned with active competition around new releases as developers offer incentives. Sale volumes, however, remain significantly down, averaging 5,000 units a month over the past six months. This figure is likely to increase with higher primary sales expected in the second half of the year.
Long-term affordability remains as issue, with many buyers needing help from the Hong Kong Mortgage Corp. The real issue, though, is that the needed increase in supply is proving to be very difficult to deliver with several factors thwarting the administration's policy initiatives, not only in housing but also in relation to land provision for development generally.
Unfortunately, the government gave the impression that not only were densities going to be increased across the urban areas but also that many parcels of greenbelt as well as so-called government, institution or community sites, open space and other greenfield opportunities were fair game for development.
This has been exacerbated by the fact that much of the larger scale development can only take place in the New Territories and the failure of successive administrations to address the challenges this brings in terms of compensation, village houses and the uncooperative attitude of the clans.
To be fair, the selfishness factor is not confined to the New Territories.
The picture is not all that bright as regards land availability as the easy options have already been identified and many of the sites that have been targeted require rezoning and servicing or clearance and lease modification together with myriad studies and assessments.
In Hong Kong, planning and land matters tend to be very prescriptive and not only take a long time - rezoning estimate nine months, lease modification 18 months - but often limit flexibility and creativity.
The administration has set up task forces to try to accelerate the process and Leung is proposing to introduce arbitration for land premium disputes, but the challenges of mindset and attitude remain.
The pressure on supply is also aggravated by the equally pressing demand for land for commercial and other non-domestic purposes and there are serious issues around the supply of office accommodation in the short and medium term.
All in all, where are we and how can we rate the administration's performance to date?
I think we have to award full marks for good intention and recognition of the seriousness of the situation brought about by the lack of a pro-active and comprehensive land supply policy over the past decade.
Similarly, all things being equal, Leung's public and private housing targets could be regarded as realistic and an appropriate balance between the two priorities. However, whether through over-confidence or a failure by those around Leung to highlight the challenges surrounding land conversion, the administration has not been able to proceed at the pace it would have liked.
More importantly, the undertakings that people would have a wider choice and that, ultimately, there would be an impact on housing affordability have yet to be delivered.
