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Hong Kong boosts land supply to cool property market

Source: Thomson Reuters Foundation - Wed, 16 Jan 2013 06:41 GMT
Author: Reuters
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* Housing problem "a priority", land supply increased

* HK${esc.dollar}10 bln in subsidies to curb road-side pollution

* High real estate prices hurting city's competitiveness (Adds more policy details, Leung quotes, reaction)

By James Pomfret and Grace Li

HONG KONG, Jan 16 (Reuters) - Embattled Hong Kong leader Leung Chun-ying made his maiden policy speech on Wednesday unveiling policies aimed at reviving his battered reputation, such as increasing land supply to cool a hot property market, fighting pollution and boosting welfare.

Leung will be hoping the populist policies will shore up his political future after several scandals, mass protests, and a failed impeachment in his first six months in office.

On Wednesday, hundreds of protesters surrounded the legislature as Leung spoke, some demanding he resign and take stronger measures to make housing prices affordable again.

The former British colony's soaring property prices, among the world's highest, have seen the spread of cage homes, wire mesh hutches stacked on top of each other and cubicle apartments as the city's residents are forced out of the market.

"Land shortage has seriously stifled our social and economic development and smothered many opportunities for people to start and expand their businesses," Leung said, noting that some 200,000 people were now on waiting lists for public housing.

"As long as the housing shortage persists, we have no alternative but to restrict external demand and curb speculative activities," he added in a two-hour speech that laid out his long-term blueprint for the remainder of his five-year term.

Leung said more land would be rezoned for housing and new areas opened up for development, with 67,000 private units expected to come on to the market in the next three to four years. A target of some 100,000 subsidised public housing units would be built in the five years from 2018, in addition to the 75,000 already planned in the coming five years.

In one project 2,000 to 3,000 heactres of land will be made available for housing by reclaiming land outside Hong Kong's Victoria Harbour.

Hong Kong and Singapore, fierce rivals as financial and wealth centres in Asia, are both struggling with over-heated property markets that have driven housing prices beyond the reach of many locals.

Both cities have identical 15 percent levies to slow foreign money into property, but the curbs on residential real estate could shift demand to retail and industrial, diverting billions of dollars to those sectors, as well as to housing markets in the United States, Canada, Australia and Malaysia.

However, some analysts said Leung's latest property moves would have little immediate impact.

"I don't feel there is a big difference. Everything is the same. The direction of increasing supply too. But short term it wouldn't change the property prices," said CITIC Securities analyst Adrian Ngan.

Hong Kong's upcoming budget in late February could give details on further property and economic measures.

POLITICAL HEAT

Hong Kong, a former British colony that returned to Chinese rule in 1997, remains a stable financial centre, though its political arena has been stormy in this past half year amid calls for Leung to quit, while the city and its opposition pro-democracy forces push for full democracy in 2017.

Leung narrowly survived a motion of no-confidence in December over unauthorised building works in his home that have undermined his integrity and triggered calls for his resignation.

"His major liability is that a substantial segment of the pro-democracy camp and a considerable segment of the population simply do not trust him and want him go," said political scientist Joseph Cheng.

Leung also focused on other livelihood issues such as welfare, with the city now having one of Asia's worst wealth gaps, as well as pollution.

Hong Kong's ageing population, or those over 65-years-old is expected to increase from 940,000 to around 2.5 million within 30 years, posing a potentially huge fiscal burden.

More than 1.1 million people, or 17 percent of Hong Kong's population, lived below the poverty line in 2011, earning less than HK${esc.dollar}3,500 (${esc.dollar}450) per month, or half the average monthly income, according to the Hong Kong Council of Social Services.

Leung proposed HK${esc.dollar}10 billion (${esc.dollar}1.3 billion) in subsidies to phase out over 80,000 heavy-polluting diesel vehicles, while fresh emission reduction targets have been set with neighbouring Guangdong province -- a major source of cross-border pollutants from tens of thousands of factories in the Pearl River Delta.

"The deep-seated problems of Hong Kong cannot be solved overnight. But we need to grasp the nettle and take the first step to deal with them," Leung said. (${esc.dollar}1 = 7.7523 Hong Kong dollars) (Additional reporting by Twinnie Siu, Christina Lo and Tan Ee Lyn; Editing by Anne Marie Roantree and Michael Perry)

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