New Hong Kong Housing Policies Will Bring Focus, Carrie Lam Says

(Bloomberg) -- Hong Kong Chief Executive Carrie Lam said new housing policies announced on Friday were a demonstration of her government’s political determination.

“The housing policies announced two days ago won’t immediately boost supply, and can hardly suppress the rise of property prices,” Lam said at a ceremony to mark the 21st anniversary of Hong Kong’s return to Chinese rule. “But these measures demonstrate the political determination and innovation of this government.”

Subject to approval by the Legislative Council, Hong Kong will charge additional rates on unsold new apartments in a bid to limit hoarding by developers and cool the city’s red-hot property market. Apartments left vacant for more than six months will be charged a 200 percent rate of the rental value, or equivalent to about 5 percent of the unit’s price.

“We hope such a move will bring a focus to the debate on land supply. Citizens can see the fruits of increasing land supply are opportunities to affordable housing,” Lam said, beginning her second year in charge of the former British colony.

Cooling measures rolled out previously by the government have failed to prevent Hong Kong from becoming one of the world’s least affordable markets for residential property, with prices more than doubling over the past decade.

Since taking office a year ago, Lam, 61, has managed to bring a less confrontational tone to city politics without straying far from Beijing’s agenda. City residents give her a job approval rating of 54.3 out of 100, according to University of Hong Kong surveys, compared with 46.4 for predecessor Leung Chun-ying at the same point in his term.

Lam began her term last year promising more frequent meetings with lawmakers and taking a veiled swipe at Leung, whom she served as top aide for five years. In subsequent months, she backed an official’s decision to a bar young activist from running for the city’s legislature because an official deemed her calls for “self-determination” as an illegal separatist platform.

President Xi Jinping, during a visit to Hong Kong last year to swear in Lam, warned that challenges to Chinese rule wouldn’t be tolerated. He urged the city’s leaders to find new ways to profit from Chinese economic clout and build political consensus.

Lam has also advanced controversial Beijing-backed proposals to let Chinese agents operate at a local high-speed rail terminus, start incorporating Hong Kong into a regional development plan and approve a satellite campus for the capital’s Palace Museum. Lam was elected in March last year by a committee of 1,200 insiders stacked with Beijing loyalists.

Lam’s efforts to avoid a repeat of the mass democracy protests that gripped the city in 2014 have been helped by a booming economy that has allowed her to splurge on popular programs. The city’s gross domestic product expanded by 4.7 percent in the first quarter, the fastest pace in almost seven years. And unemployment is at a two-decade low.

Still, there are reasons to think the honeymoon might not last. Lam’s approval rating already lags those of the Hong Kong’s first two post-colonial executives, Tung Chee-hwa and Donald Tsang.

Rising U.S. interest rates could force Hong Kong to tighten monetary policy thanks to its pegged currency, during a year in which the benchmark Hang Seng Index has fallen 3.2 percent amid worries about President Donald Trump’s tariff threats. Meanwhile, the local property market -- the world’s least affordable -- continues to defy government cooling efforts.

©2018 Bloomberg L.P.