Hong Kong Chief Executive Pledges Property Curbs to Stay
Hong Kong, the world’s most expensive home market, will not ease its real-estate curbs until there’s a steady supply of new properties as the government seeks to address concerns that it favors developers.
Earlier actions have brought down prices and rents, and the government can do more if needed, Chief Executive Leung Chun-ying, 58, said in an interview in New York. An index of Hong Kong property stocks fell to the lowest in nine months.
“There’s a voice out there in the Hong Kong community that the government should ease off,” the former property surveyor said yesterday. “This is not the time to relent.”
Property transactions in Hong Kong have tapered off, hurting developers, since Leung introduced his toughest measures yet in February by doubling a sales tax and extending curbs to commercial real estate. As Leung completes his first year in office in July, he’s seeking to focus on the economy to bolster his popularity, which is near a record low.
“Leung has been trying to strengthen his performance in social and public policies to win him more public support,” said Dixon Sing, an associate professor of social science at the Hong Kong University of Science & Technology. “Failing to get property prices under control will risk hurting Hong Kong’s competitiveness and Leung’s popularity.”
Home prices in the former British colony have more than doubled to a record since the start of 2009, spurring protests as developers booked rising profits. Leung came into office last July pledging to narrow a record wealth gap, address housing affordability and clean up the environment.
The Hang Seng Property Index, which tracks nine of the biggest developers listed in the city, fell as much as 3.6 percent today to the lowest since September. It closed 0.5 percent lower, extending this year’s decline to 11 percent, compared with the 7.8 percent decline in the benchmark Hang Seng Index.
Leung in February doubled stamp duty taxes on all property transactions over HK$2 million, after imposing an extra tax on home purchases by companies and non-residents in October. Since 2010, the government has charged an extra tax of up to 20 percent of the value of homes on buyers who resell them within three years and raised the minimum down-payment on mortgages for homes costing more than HK$7 million.
Home transactions fell for a third consecutive month in May. They dropped to 3,286 in December, the lowest since November 2008. Prices have dropped 3 percent since a record high in March, according to an index compiled by Centaline Property Agency Ltd.
“We’re delivering results,” Leung said when asked about his performance. “We have made a very clear stance on the question of property prices. For the first time in a very long time, the allegations that there is somehow collusion between Hong Kong and the developer industry have gone away.”
Leung’s support rating was 46.7 on a scale of 0 to 100, according to survey of 1,012 people conducted June 3-5 by the University of Hong Kong’s Public Opinion Program, down from 53.8 when he took office. He has been hurt by illegal building additions to his home and student protests against a plan to introduce national education classes that are seen as overly favorable to China’s Communist government.
The Hong Kong economy will continue to be bolstered by rising numbers of Chinese tourists, Leung said. The city had 48.6 million arrivals last year, of which more than 34.9 million were from China, according to the government. Total arrivals may gain 15 percent this year, Leung said.
Mainland Chinese accounted for 15 percent of all residential property sales in Hong Kong in the first quarter, down from 31 percent over the previous three months, according to Centaline. The figure reached a record 51 percent in the third quarter of 2011.
Leung said he’s aware of the rising tension Chinese visitors have brought to Hong Kong, as they swamp shops and buy up daily necessities and homes. The government will continue to ensure that residents come first, he said.
The chief executive has banned Chinese mothers from giving birth in Hong Kong, restricted purchases of milk powder by visitors and sold some land to be developed for resident-only housing.
Asked about the city’s 30-year-old currency peg to the U.S. dollar, Leung said it has served Hong Kong well and there’s no discussion of replacing it.
To expand the economy in the longer term, Leung said he wants to add to the services the city provides, cementing its place as China’s finance center. Hong Kong should look into shipping finance and insurance, for example, diversifying away from managing initial public listings and commercial banking, he said.
“We want to grow, we want to diversify,” Leung said. “We want to move up the food chain. China is fast becoming a major maritime and shipbuilding nation in the world. Is there a reason why we shouldn’t diversify?”
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