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â€œIn the past few weeks, government officials in charge of land and housing policies have delivered a series of high-profile messages about rising housing supplies. Bowen Leung Po-wing, Secretary for Planning, Environment and Lands, said the Government would make available 260 hectares of land for private housing over the next five years â€“ an increase of about 80 per cent on the 145 ha released over the past five years. Dominic Wong, Secretary for Housing, said there would be an increase in housing supply next year. â€˜The supply of flats will increase steadily from 1998 onwards,â€™ he said.â€
The government put up three lots of residential land for public auction yesterday, and all three lots were sold for high prices. The most prominent one, the former Lingnan College site on Stubbs Road, Hong Kong Island, was auctioned for $4,490 million, which translates into $24,829 per square foot accommodation value (value of land per square foot of total developable floor space). The total cost of development, including construction and interest, will be more than $35,000 per square foot floor space. This prompted luxury property owners to raise selling prices amid a new round of bullish forecasts.
As expected, the anti-speculation measures implemented by the government since last November failed to rein in the runaway property prices because the real culprit was not the speculative activities in the market. In his Budget Speech last month, Hong Kongâ€™s Financial Secretary John Tsang had no new plans for cooling the property market except to increase land supply. This, on one hand, confirmed the governmentâ€™s misjudgement of the market in the previous round of actions and, on the other hand, showed that it now has recognised the root of the problem and is taking steps to address the issue.
In less than two months after the government introduced a series of anti-speculation measures, the property sales market resumed its activities back to the level before the measures took effect. The government had hoped to rein in the runaway property price by levying punitive stamp duty on property resale within two years of purchase, ranging from 5% to 15% of transaction value depending on the time of disposal. It cited property speculations (mostly in the form of â€œconfirmor saleâ€) as the culprit of high price and determined that the extra stamp duty would stamp out speculative activities, and therefore would contain price hike.
Much has been said and written about the reasons behind the property price hike in recent years. Observers and industry professionals have cited economic growth, wealth accumulation, low interest rates, aggressive mortgage lending, skewed supply-demand curve, influx of mainland buyers and speculation activities among the main reasons. True, some of these contributed to the hike. But the one fundamental and crucial factor at work is Hong Kong governmentâ€™s perversion of the land application system.