Hong Kong will allow only local residents to buy apartments to be built on two sites it plans to sell, in the government’s toughest move to limit purchases by Chinese from other cities who have helped propel prices to the world’s most expensive.
Only permanent Hong Kong residents will be allowed to own the units for the first 30 years after the sites in eastern Kowloon are sold next year, Chief Executive Leung Chun-ying, who came to power in July pledging to boost the supply of homes to keep housing affordable, said yesterday. Details of the measure come a week after it was flagged as part of a 10-point package Leung announced on Aug. 30 that also included the speeding up of the approval of permits for private project sales.
The policies are the toughest since the government in June last year increased down-payment requirements to quell concerns about a surge in non-local purchases, particularly by investors from mainland China who account for a third of new home buying in the city and helped drive prices up 85 percent since the beginning of 2009.
“The restrictions may influence developers’ sentiment when they bid for the sites,” said Vincent Cheung, national director for valuation and advisory at property broker Cushman & Wakefield Inc. “I won’t be surprised if prices end up being 10 to 15 percent lower than what the normal sites would fetch. But at the moment demand from local buyers is still strong. ”
Leung, who was elected in March by a committee of mostly businessmen, professionals and lawmakers, has pledged during his campaign to address a widening wealth gap and concerns that housing is becoming unaffordable to the general public.
Yesterday’s announcement came a day after Leung canceled a trip to the Asia-Pacific Economic Cooperation summit in Vladivostok, Russia, his first scheduled overseas visit. His government is also facing protests over a proposed national education program, which detractors said portrays an overly favorable view of Communist Party rule in China.
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.
“Land for housing in Hong Kong is a rare resource,” Leung told reporters at a briefing broadcast by the city’s Cable TV yesterday. “When we decide on how to use it, we need to make sure we are satisfying the need of Hong Kong people first.”
The sites, which the government plans to sell in the first quarter, have a combined area of 1.6 hectares (4 acres) and can be turned into about 1,100 apartments, Leung said. The government is the main supplier of land for development in the city.
The seven-member Hang Seng Property Index, which tracks developers, including Sun Hung Kai Properties Ltd. and Cheung Kong (Holdings) Ltd., rose the most since February, adding 3.5 percent, at the close of trading. It has gained 18 percent this year, compared with the 7.4 percent increase in the benchmark Hang Seng Index.
“Given that only two sites are included in the plan, it probably won’t have too much impact on the overall private housing market,” said Alfred Lau, a Hong Kong-based analyst at Bocom International Holdings Co. “It may benefit buyers at the lower to middle end of the market.”
The property index has risen 2 percent since Leung unveiled the new efforts to curb prices on Aug. 30.
The number of home transactions in Hong Kong rose 42 percent in August from a month earlier, the biggest increase since March.
Before this year’s rebound, home prices fell 4 percent in the last three months of 2011, the biggest quarterly drop since the global credit crisis, after Donald Tsang, Leung’s predecessor, introduced mortgage restrictions last year and as China’s economy began to slow.
Hong Kong home prices are 65 percent higher than Tokyo’s, the world’s second-priciest place to buy a home, according to a study by Savills Plc published last September that compares prices in 10 global cities including New York and London.