While many home buyers are pinning their hopes on the upcoming policy address by Chief Executive Donald Tsang to adequately address rising property prices, analysts generally believe that there isn't much more the government can do to rein in prices in the short term. In the medium to long term, they still believe the best solution is to increase home supply.

"Measures introduced to stabilize the city's property market in the policy address next week should be mild," Buggle Lau, chief analyst at Midland Realty said during a media briefing Thursday. "The government has done a lot during the past year and it should be careful with any adverse effects new measures could bring about."

The Hong Kong government barely intervened in the city's property market after the last major slowdown in 2003. But it has initiated a chain of major tightening measures since October 2009 to stabilize current market conditions, which are buoyant.

However, defying government efforts to bring speculators to heel and prevent an asset bubble, average home prices in Hong Kong have surged almost 166 percent from an average of HK$1,854 per square foot in April 2003 to the current HK$4,931 per square foot, according to data provided by Midland Realty.

Lau believes the goal of these government measures is to help the property market sustain steady growth and prevent volatility. He said home prices have increased 14 percent in the first nine months of the year despite government tightening. They are also likely to gain another 5 percent in the fourth quarter as demand remains exuberant.

"From a long-term perspective, the government should consider freeing more land to expedite the increase in market supply, to alleviate the inadequate supply in the market and stabilize the home prices," said Lau.

Craig Shute, senior managing director for Hong Kong, Macao and Taiwan at CB Richard Ellis, agrees that it would be more practical for the government to curb property prices on the supply side instead.

"Since there are limited tools available to curtail soaring flat prices, tackling the shortage of mass market flats should be top of the agenda," he said.

One of the root causes for the recent price surge, according to Shute, is the lack of recent large-scale mass residential projects.

Shute said if the government-subsidized Home Ownership Scheme (HOS) is able to resume, it would help to rectify the current shortage of public rental housing as well as allowing a larger portion of existing housing units to go to those really in need.

Ricacorp Properties' research head Patrick Chow also agrees that the best thing for the government to do now is to increase land supply and boost the number of low to mid-market units for aspiring home buyers.

Nevertheless, Chow believes the government is short of options right now as Hong Kong home prices have increased too much to be pulled back easily.

"All these options have been mentioned in the past. If there are any additional measures put forward in the upcoming policy address, I don't expect them to be innovative," Chow added.

China Daily

(HK Edition 10/08/2010 page2)