Hong Kong will stop offering residency to foreigners who buy property and unveiled a rent-to-buy program, intensifying efforts to cool home prices that have jumped almost 50 percent from 2009.
The government will temporarily remove real estate from its Capital Investment Entrant Scheme, which was set up to encourage foreigners to invest to gain residency, Chief Executive Donald Tsang said in his annual policy address today. It also will offer 5,000 units for first-time property buyers to rent for as long as five years before purchasing.
The government in the past year raised mortgage down payments and increased land supply to rein in home prices that have surged since the start of 2009 on the back of record-low interest rates and an influx of Chinese buyers. The Hang Seng Property Index recovered from its biggest drop since May on optimism the measures won’t be enough to dent demand.
“Many of the policies announced today may have only limited impact on the property market in the near term,” said Cusson Leung, a Hong Kong-based analyst at Credit Suisse Group AG. “Take the rent-to-buy scheme, a lot can still happen over the next few years.”
The Hang Seng property gauge, which tracks the city’s seven biggest developers, rose 0.3 percent at the 4 p.m. close of trading, after dropping as much as 3.4 percent earlier.
Cheung Kong Holdings Ltd., the builder controlled by Hong Kong’s richest man Li Ka-shing, added 0.2 percent to HK$118.70. Sun Hung Kai Properties Ltd., the city’s biggest developer, fell 0.6 percent to HK$135.90, trimming a loss of as much as 5.4 percent.
“Many find it unnerving that property prices have kept rising and years of hard-earned savings cannot even cover a down payment,” Tsang told the city’s lawmakers. “They hope that the government will help them realize their aspirations for home ownership.”
Under the rent-to-buy program, the government will let first-time property buyers rent for as long as five years at a fixed amount. During the period, tenants will be eligible to use half of the total rent paid toward a down payment to buy a home.
The first project under the plan will provide about 1,000 units in the Tsing Yi district and is expected to be completed by 2014, Tsang said.
The government also raised the investment requirement for residency to HK$10 million ($1.3 million) from HK$6.5 million.
“Residents have complained that housing has become unaffordable,” said Tim Leung, who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. “The government has the responsibility to force the market to supply homes to the general public.”
Home prices have surged almost 50 percent since the start of 2009, according to Centaline Property Agency Ltd.
The government will continue to boost land supply and expects 61,000 new units to come onto the market in the next three to four years, Tsang said. In the past 10 years, an average of 18,500 new units were sold annually, he said.
Tsang also pledged to strengthen regulations of developers’ sales tactics, and the government will study requiring builders to list saleable floor areas instead of building area when calculating per-square-foot prices.
“These are good measures as it will give buyers a standardized idea of the size of the flats they are buying,” said Wong Leung-sing, a research director at Centaline, Hong Kong’s biggest privately-held property broker. “I think this whole policy address is a move in the right direction.”