In recent years, the Hong Kong property market has been overheated, with housing prices and rents breaking new records from time to time. Young people who have yet to purchase their own home keep complaining that their salary increase cannot possibly catch up with the rapid rise in property prices; some are convinced they could not afford a decent home in their lifetime. As such, housing policy has been at the core of chief executives' policy addresses in the past few years. In fact the previous administration, with the support of various government departments, worked very hard on this issue and land supply has indeed increased. Moreover, homeownership schemes and youth hostels are among the policies reintroduced to help lessen the youth's grievances. Alas, low interest rates and a booming economy mean home prices remain high, and applying for a home mortgage is more and more challenging.

The new CE also places great emphasis on housing policy but her focus seems to have shifted from increasing land supply to helping people purchase their own home. In her maiden Policy Address, Chief Executive Carrie Lam Cheng Yuet-ngor stated that the government "will focus on homeownership to enable our people to live happily in Hong Kong and call it their home. The government will strive to build a housing ladder to rekindle the hopes of families in different income brackets to become homeowners." This subtle change may not be noticeable to all, but it has a tremendous impact on the overall housing policy in practice. When the policy goal is to increase land supply, the working objectives would be to locate, create or sell more and more land for building public rental housing, Home Ownership Scheme flats and private residential apartments. Performance indicators would then be the total number of annual new residential apartments, waiting time of public rental housing applicants, total size of land sales, etc. In fact, these were the performance indicators of relevant government departments in the past five years, albeit with varying results.

Now housing policy has changed to increasing homeownership, the priority of the government has become raising the overall homeownership rate and supplying more residential units for people to purchase. An indication of such policy change is that while the government insists it is still trying to cut the waiting time of public rental housing applicants, no new measures have been introduced to restore the target waiting time back to three years on average. On the other hand, it was announced that more than 4,000 new public housing units to be completed by the end of next year would be set aside for the Green Form Subsidised Home Ownership Pilot Scheme, which are to be sold to existing public rental housing tenants. Tenants who buy one of those 4,000 new apartments will have to give up the public rental housing units they now occupy and the overall housing supply remains unchanged but it takes some weeks to refurbish those old apartments and thus slightly increase the waiting time of other public rental housing applicants. Despite this drawback, the government still decided to adopt this new measure. This shows it places higher priority on the homeownership rate.

The "Starter Homes" pilot scheme for Hong Kong residents is the most eye-catching new proposal in the address. Given that the government's land supply is limited and it does not want to affect land supply for other uses, the quickest way is to work with private developers and make good use of their land reserves. Those land reserves held by private developers mostly comprise farm land or brownfield sites in the New Territories. Unfortunately, in today's highly politicized society, the accusation of collusion between government and businesses seems unavoidable. No matter how stringently regulated and transparent the process is, there are bound to be some skeptics who think private developers are taking advantage of the public and the opposition will certainly try to derail the scheme. Yet, if the terms offered by the government are too harsh, private developers may lose interest and the scheme would fail before it begins. The government is well aware of this dilemma so it is still working on details and only a pilot scheme involving government land has been announced.

Obviously, I do not have a crystal ball that can predict the future situation of the property market. However, while reading the Policy Address, I cannot help but recall that 20 years ago when property prices were also at a high level, the government launched schemes to help people purchase their first homes, drastically raised housing supply targets and planned to have 70 percent of local residents living in their own home. History does not always repeat itself, but we should all be cautious. No matter what, it is certain that it takes years to significantly increase land supply and there will not be a drastic change in supply in the coming year or two. People who are looking to purchase their first homes may have to wait a little longer.

(HK Edition 11/02/2017 page8)