Written by 
Themis Qi
Hong Kong will keep increasing its land supply to build up its land bank despite the weak market sentiment, Financial Secretary Paul Chan Mo-po says in response to an “overcorrection” warning issued by former city leader Leung Chun-ying.
Chan said on radio yesterday that authorities cannot suspend land development because of market volatility – which is a lesson learned from previous administrations.
Chan recalled that the halt of land sales and supply after 2003 – when an average of only 9,600 units were offered each year over six years – had a huge impact on the property market.
But with an ample supply of land, the administration is able to adjust its timely release according to the market sentiment, he said. Chan stressed that infrastructure is important and the administration will make good use of sites in remote areas to avoid fueling the surge of home prices in popular areas.
Former chief executive Leung on Thursday posted on social media that the excessive supply of land would lead to an “overcorrection” and further hurt home prices, which could then lead to more negative equity cases and force the administration to deliver more stimuli to “save the market.”
Leung, amid a sluggish market, was also concerned that the administration would have to subsidize each new development zone in underdeveloped areas, increasingly threatening revenue.
In response, Chan said the supportive measures are mainly aimed at restoring the market back to levels before the housing curbs were rolled out, and that the administration would let the market adjust and operate itself.
Chan does not think that demand would exceed supply and cause home prices to surge again, given the caution shown by homebuyers.
”The reinvigoration of the property market is also important for the society and the economy,” Chan said.
Chief Executive John Lee Ka-chiu in his policy address on October 16 further eased mortgage rules to levels last seen in 2009, including allowing all buyers to borrow as much as 70 percent of the property value.
The relaxation came eight months after the administration scrapped additional housing stamp duties, which were introduced as early as 2010 to cool down the market. The scrapping, however, helped home prices rebound only for two months.
As of August, home prices had fallen about 27 percent from a peak seen in 2021.
Regarding the third-quarter GDP figures to be released on Thursday, Chan predicted that the data would be “modest” but he stressed that the economy will improve in the long run.
Chan, meanwhile, estimated that the administration needs to spend HK$4 billion more each year for the new measures announced in the policy address.
In addition to the development of Northern Metropolis, the administration plans to issue bonds to raise up to HK$130 billion per year, with the outstanding loans accounting for about 6 percent of the local GDP.
Chan predicts it would take about three years for the city to break even again after recording a deficit of over HK$100 billion for two consecutive financial years.
themis.qi@singtaonewscorp.com