By Kate O’Keeffe and Chester Yung
Hong Kong Chief Executive Donald Tsang is considering resuming a controversial subsidized housing program, people familiar with the matter said Saturday, as pressure from local and Beijing officials to tame soaring property prices in the city mounts.
Home prices in the Chinese territory have surpassed the peak hit in the last asset bubble in 1997 as abundant liquidity, record-low interest rates and a flood of investors from the mainland have buoyed the market–and created a conundrum for policy makers who have been struggling to implement measures to temper prices.
A resumption of the Home Ownership Scheme, a program abandoned in 2003 after developers complained about government interference in the property market amid a sharp correction in private residential prices, would represent the government’s boldest attempt yet to quell sizzling prices. Home prices in Hong Kong have risen around 14% so far this year on top of a 24% jump in 2010.
Mr. Tsang, who had earlier resisted calls to resume the program that had allowed eligible residents to buy homes at a discount of as much as 40% to market levels, appears to be warming to the idea.
“The chief executive may address the issue of subsidized home ownership in the upcoming policy address but the issue has to be considered together with ways to increase land supply in Hong Kong,” a representative from Mr. Tsang’s office said Saturday.
The comments follow a recent visit to the territory from the top Chinese government official in charge of Hong Kong affairs Wang Guangya, during which he said the local government needs to pay particular attention to addressing the housing problems of low-income people.
“As a government, more efforts should be spent on housing issues of the general public, particularly the underprivileged. Housing is both a social and economic issue, and if it’s not handled well, it becomes a political issue,” Mr. Wang said.
They also follow a decision last week by Hong Kong’s de-facto central bank to tighten mortgage lending again and for the first time toughen lending standards for nonlocals–just one day after the government sold a luxury residential site for 11.65 billion Hong Kong dollars (US$1.49 billion), the city’s second-highest price for land sold at an auction.
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