Hong Kong Chief Executive Leung Chun-ying vowed to boost housing supply, tackle pollution and provide more elderly care, as quality-of-life issues dominated his first policy address as the city’s leader.
Hong Kong, the most expensive city in the world to buy a home, will maintain property curbs for overseas buyers, Leung told the Legislative Council. The supply of housing in the next five years will exceed the previous period by at least 18 percent, according to figures compiled from Leung’s speech.
Yesterday’s speech marked Leung’s effort to follow up on promises he made while campaigning for the job to bridge Hong Kong’s record wealth gap and make homes more affordable. His term so far has been defined by battles with opposition lawmakers and protests by tens of thousands of people, and his approval rating -- 31 percent -- is at a record low.
“This administration has made tackling housing problems its single most important objective, more so than any previous governments,” said Paul Tang, chief economist at Hong Kong-based Bank of East Asia Ltd. “They have now provided a blueprint for its housing policy.”
With the steep price of housing ranked the city’s No. 1 issue by its people, Leung devoted about a quarter of his two-hour speech to expanding public housing and other ways to tame property prices. Hong Kong’s home prices have grown 1.1 percent since Leung’s government announced a new tax on property purchases by non-locals. Before that, prices had risen 18 percent from the beginning of 2012.
Leung announced a plan to offer HK$10 billion ($1.3 billion) in subsidies to replace old diesel vehicles and limit their life-span to battle smog that causes 3,000 premature deaths a year. He said he wanted to make Hong Kong a more livable city with “lush countryside, fresh air and a clean environment.”
“We must have the courage and resolve to make hard choices and decisions with the overall interest of the community in mind,” Leung said. “The fact is that the community will never reach a full consensus over such issues. In fact, we cannot afford to, and should not, wait for a full consensus.”
His remarks echoed those made by his predecessor Donald Tsang, who also sought to tackle the city’s high property prices and pollution. Prices rose 83 percent between the start of 2009 and the end of Tsang’s term last year.
Leung also outlined an economic approach that involves maintaining low taxes and keeping a balanced budget. He said the government shouldn’t intervene in the market if it’s functioning properly. Hong Kong’s economy will probably expand 3.9 percent in 2013, according to a forecast by the Asian Development Bank published in October. GDP increased 1.3 percent in the third quarter, government statistics show.
“We think it is a very positive statement to maintain Hong Kong’s status as the freest market economy in the world,” Australia & New Zealand Banking Group Ltd. economists Raymond Yeung and Louis Lam said in a said in a research note. “The statement suggests that Hong Kong will stick to ‘small government big market’ approach as its overall economic policy.”
Leung’s government will provide land to build 75,000 public homes in the next five years, and the private sector may sell 67,000 in the next three to four years, he said. The total of 142,000 compares with the 124,000 built in the previous five years, based on figures Leung provided in his speech.
The government will also target building 100,000 public housing units in the five years from 2018, and 17,000 subsidized housing in the four years from 2016, he said.
Hong Kong’s benchmark Hang Seng Index was little changed after Leung’s speech, falling 0.1 percent to 23,356.99. There were “no surprises” in the speech and Leung’s property measures won’t be felt for another two to three years, Donna Kwok, a Hong Kong-based economist at HSBC Holdings Plc., said in a research note. Further property-cooling measures can’t be ruled out, she said.
“The important thing that came out of this address is that he reiterated the government’s determination to maintain a more stable land supply in the long run,” said Alfred Lau, Hong Kong-based analyst at Bocom International Holdings Co. “He’s sending a message to people that they shouldn’t expect home prices to go up forever.”
The city’s home prices have doubled over the past four years, surpassing their 1997 peak, and Hong Kong is now the most expensive place to buy an apartment, according to property broker Savills Plc.
An 800-square-foot apartment in the middle-class Taikoo Shing neighborhood sold for HK$8.88 million on Jan. 10, according to data from the Centaline Property Agency. That’s more than six times the December U.S. median home price of $180,600.
Leung spoke after overcoming a no-confidence vote and the opposition’s Jan. 9 bid to impeach him over illegal additions at his home. Leung won the chief executive job after casting doubt on the integrity of his main opponent, Henry Tang, following revelations that Tang’s wife built a basement with a wine cellar and movie theater at their house without government approval.
At the same time, Leung’s popularity has continued to drop in the months since he took office July 1, according to survey data from the University of Hong Kong’s Public Opinion Program. His approval rating is 31 percent, the lowest since he took office, it said.
Leung pledged to expand residential care for the elderly. The government will also review plans to give more benefits to Hong Kong elderly who retire in mainland China, he said.
The opposition against him hasn’t deterred Chinese leaders. Communist Party General Secretary Xi Jinping told him on a Beijing visit last month that he has China’s support.
Thousands of Hong Kong residents took to the streets Jan. 1 to demand Leung resign. They said he had lost credibility by misleading the public about the illegal renovations at his home.
Leung said the government will “promote and achieve” universal suffrage in accordance with the city’s constitution and the decisions of the Chinese government, without giving details or a timetable.
China has promised to introduce universal suffrage to Hong Kong by 2017, meaning Leung would be the last leader chosen by a committee of lawmakers, billionaire businessmen and professionals.