An elevated view from Fei Ngo Shan Mountain shows buildings in the Kowloon region of Hong Kong. Chief Executive Donald Tsang Thursday announced that the administration will carry out public consultations on the issue of providing more subsidized flats in the future. Daniel Groshong / Bloomberg News

Public consultations to be held to address and defuse price worries

As the government recent measures against property speculation fail to dispel public anger over swelling property prices, Chief Executive Donald Tsang announced that the administration will carry out public consultations on the issue of providing more subsidized flats in the future.

Tsang promised that he will explain this issue more clearly in the coming October Policy Address this year.

Tsang attended the Legislative Council (LegCo) Thursday to answer different enquiries from LegCo members. The enquiry questions involved a variety of social issues, and in view of recent soaring property prices, most of the members focused their questions on this issue.

Tsang noted that from January 2009 to March 2010, local property prices skyrocketed nearly 33 percent, clear evidence of local property speculation. He cited the extreme low level of global interest rates, capital inflows into the local property market and the limited local flat supply as the three main factors explaining the recent soaring property prices.

He emphasized that the administration is taking proactive measures to enhance flat supply and to tackle the issue. The government and its Urban Renewal Authority (URA) previously had announced different measures to damp property speculation.

Concerning the sensitive issue of whether the government should resume building subsidized flats in the future, Tsang said that a society needs to reach consensus over this thorny issue, and that he has, accordingly, proclaimed that the government will conduct public consultations on it in the next five months. He promised the consultations will be conducted in a manner most likely to ensure fairness and thoughtfulness.

He said that the government must be cautious in handling this issue, as it involves two considerations.

First, if greater priority is given to subsidizing home ownership, this means less land will be allocated for public rental housing, and this will decrease the supply for public housing. This may create unfairness in resource allocation.

Second, the government can be a destructive force in the property market, Tsang said, recalling the experience during the period of the 1997 Asian financial crisis. The administration at that time set rigid flat supply quotas that led to a local property price slump. The price slump was so huge that it made many homeowners' mortgaged properties fall into negative equity.

"The administration does not want the property market to exhibit huge volatility in the future; rather we want the market to be stable," Tsang declared.

As the government and the URA are stepping in to combat property speculation by announcing measures to control undesirable property sales practices, the Estate Agents Authority (EAA) Thursday also announced that it will issue three circulars in regulating real estate agents' sales practices in primary market transactions.

The circulars will cover three main areas: the ethics of the real estate agents, the maintenance of order during the process of property transactions and the disclosure of property information to the property buyers. The new circulars will take effect on 14 May 2010.

EAA Chief Executive Officer Rosanna Ure said that if any real estate agents are breaching the circulars' stated rules, they will risk having their licenses revoked by the EAA.

China Daily

(HK Edition 05/07/2010 page2)