Hong Kong to Boost Home Sales, Favor Locals as Prices Surge

Hong Kong to Boost Home Sales, Favor Locals as Prices Surge
Residential buildings stand in the Tsuen Wan district of Hong Kong. Photographer: Jerome Favre/Bloomberg

Hong Kong will boost the supply of homes and give preference to local buyers as it seeks to cool housing prices that have surged to the world’s most expensive, fueled by record-low interest rates and Chinese investment.

Chief Executive Leung Chun-ying announced a 10-point package yesterday that included speeding up the approval of permits for private project sales, selling public units that were originally intended for rent, and drafting policies that will give preference to local buyers.

The measures are the toughest since the government in June last year increased down-payment requirements, and the strongest move yet to quell concerns about a surge in non-local purchases, particularly by mainland investors that account for a third of new home buying in the city and helped drive prices up 85 percent since the beginning of 2009. The measures don’t go far enough, said Wong Leung-sing, associate research director at Centaline Property Agency Ltd.

“It’s a nice gesture, but it won’t have a real impact on prices,” said Wong. “Accelerating sales and increasing supply wouldn’t solve the problems. They haven’t addressed the real issue and that’s the market is flush with cash.”

The seven-member Hang Seng Property Index, which tracks developers, including Sun Hung Kai Properties Ltd. and Cheung Kong (Holdings) Ltd., rose 1.1 percent at the close of trading in Hong Kong. The benchmark Hang Seng Index fell 0.4 percent.

Wealth Gap

Sun Hung Kai, the city’s biggest builder, rose 1.5 percent to HK$100.60, while Cheung Kong, controlled by Li Ka-shing, Hong Kong’s richest man, gained 1.6 percent to HK$105.50. Henderson Land Development Co., controlled by billionaire Lee Shau-kee, gained 2.1 percent to HK$47.70.

“These policies will help stabilize prices,” said Lee Wee Liat, a Hong Kong-based analyst at BNP Paribas. “They’re focusing on flushing out the supply to the market. Developers will try and speed up sales but will be moderate with pricing. The important thing is they’re not trying to stifle demand.”

Leung, a surveyor, took over as Hong Kong’s leader last month on a pledge to address a widening income gap and housing affordability.

Home prices have increased 12 percent this year, bringing the gain to 47 percent since October 2009, when Leung’s predecessor, Donald Tsang, first introduced measures to prevent the formation of an asset bubble. Prices recovered from the second half of last year even as the government lowered its growth forecast for 2012 and as China’s economy slows.

Street Protests

Tens of thousands of protesters took to the streets in a largely peaceful demonstration in July, hours after Leung pledged to do more to address poverty and boost public housing. The demonstrators turned out to draw attention to issues from the wealth gap and human rights in China to demands for a higher minimum wage.

“The Hong Kong community has issues with housing,” Leung said at a briefing yesterday. “The administration is a major supplier and major planner. I want to stress we have the responsibility.”

The restriction on purchases by people outside of Hong Kong may be incorporated into land sale agreements, said Leung, adding that the measures will be implemented “when necessary.”

Buyers from other parts of China made up 36.8 percent of all new sales by value in the first quarter, down from 37.9 percent in the previous three months, according to Midland Holdings Ltd. The proportion reached 53.9 percent in the third quarter last year, the realtor said.

The measures “are the right direction,” said Ronnie Chan, Chairman of Hang Lung Properties Ltd., the Hong Kong developer with almost half of its assets in other Chinese cities. “There’s no quick fix, but I can see these measures show the government’s determination.”

Boosting Supply

Swire Properties Ltd. sold a 6,755-square-foot apartment in a Hong Kong building designed by Frank Gehry, the architect of Bilbao’s Guggenheim Museum and the Walt Disney Concert Hall in Los Angeles, for HK$430 million ($55 million), the developer said yesterday.

Hong Kong is the world’s costliest place to buy an apartment, according London-based broker Savills Plc, which compiles an index of 10 global cities, including the U.K. capital, Moscow and New York.

The government expects developers to supply 65,000 private units over the next three to four years and will make available 75,000 public housing units, Housing Secretary Anthony Cheung said at the briefing yesterday.

Cheung Kong, the city’s second-largest developer by market value, this month paid HK$9.63 billion for a site in the northwest Tsuen Wan area, 37 percent higher than the estimate by surveyors, in its first acquisition this year.

Falling Transactions

Transactions in the city have eased this year as economic growth in Hong Kong and China slowed. The number of homes sold in the first seven months fell 22 percent to 46,910 from the same period a year earlier, according to data released by the Land Registry.

Hong Kong home prices will probably remain little changed for the rest of 2012, Vincent Cheung, a director at property broker Cushman & Wakefield Inc., said in a briefing this month.

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