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1. HK risks property bubble, says HSBC chief

2. LegCo: Transfer of Functions Under Housing Ordinance (Cap 283)

3. Housing fiasco attacked

1. HK risks property bubble, says HSBC chief
KELVIN CHAN and PEGGY SITO, SCMP 12 February 2004

The head of Hong Kong's biggest bank yesterday warned the city was at risk of a property bubble as speculators re-entered the market.

The warning was part of a rare salvo from Hongkong and Shanghai Banking Corporation chairman David Eldon against the problems dogging Hong Kong's economy.

He expressed fears the city relied too much on a financially irresponsible government to drive growth and was too focused on China at the expense of other markets. He also said ratings of Hong Kong's economy could tumble under the impact of the property market bubble.

"I get a little concerned when I hear property prices are moving up very rapidly," he said. "I don't mind speculators in the market. But if they play far too much and if they are going to ride property prices [up] too quickly, I don't think it's a good thing for Hong Kong."

Home prices have risen by more than 20 per cent since late August, and are set to rise by a further 10 to 20 per cent this year, following more than five years of price drops which saw values drop by more than half. Property transactions last month were up nearly 8 per cent on December business. Still, while some banks have warned of the risk of overheating in the property market, the HSBC chairman's comments run counter to the optimistic remarks of other executives.

In a speech to the British Chamber of Commerce, Mr Eldon said it was hard to tell whether the upturn would soon plateau, or if it was the start of sustained growth.

"Most people now seem to believe the worst is behind us, and it probably is," Mr Eldon said. "However ... sentiment may be running ahead of the fundamentals."

Warning that Hong Kong should not focus solely on the mainland, despite its many new opportunities, Mr Eldon said: "We have to remember that companies and people are attracted to Hong Kong for a variety of reasons, including, but certainly not limited to, our linkages with the mainland."

He also warned interest rates might have to be raised to defend the peg - thereby denting growth - if the government did not rein in its budget deficit, forecast to hit $78 billion this year.

Unless it shrank, credit-rating agencies would also probably lower their ratings on Hong Kong, further pushing up the cost of credit, he said.

Mr Eldon's comments on the property market found an echo in some quarters.

Liu Chong Hing Bank senior general manager Brian Cheung Nam-chung said: "I really feel housing prices are rising too fast. The recent surge is unhealthy."

Bank of China (Hong Kong) said in its latest research report that it was not healthy for property prices to surge too fast.

Last week, developer Cheung Kong warned against government intervention to rein in prices, and last night developers and property agents insisted the market was healthy.

Ricky Wong Kwong-yiu, assistant director of Wharf (Holdings), said property buying was partly led by low interest rates.

He said investors accounted for 20 per cent of buyers, which he said was not alarming considering more than half of buyers at the market's peak in 1997 were speculators.

Louis Chan Wing-kit, director of Centaline Property Agency, also said he did not see any bubble, adding there were a limited number of big speculators in the market.

2. LegCo: Transfer of Functions Under Housing Ordinance (Cap 283)
Hong Kong Government, 11 February 2004

Following is a speech delivered by the Secretary for Housing, Planning and Lands, Mr Michael Suen, at the Legislative Council today (February 11) on the resolution of the Interpretation and General Clauses Ordinance (Cap 1) for transfer of functions under the Housing Ordinance (Cap 283):

Madam President,

I move that the motion on the agenda be passed. The motion seeks to amend Sections 14(4) and 15(2) of the Housing Ordinance so that the statutory functions of the Chief Secretary for Administration (CS) under the two sections may be transferred to the Secretary for Housing, Planning and Lands (SHPL).

Sections 14(4) and 15(2) of the Housing Ordinance provide respectively that CS shall lay a statement of accounts, an audit report and an annual report of the Housing Authority on the table of the Legislative Council each year before specified dates. Given that the affairs of the Housing Authority are under the responsibility of SHPL, the Government proposes that the above functions be transferred to SHPL.

In exercise of the powers conferred to him under "Specification of Public Offices" (Legal Notice 471 of 1996), CS has delegated the above functions to SHPL. As such, upon the transfer of the above functions to SHPL, "Specification of Public Offices" (Legal Notice 471 of 1996) can be repealed. Subject to the approval of the motion by this Council, the amended provisions will come into force on the date of their publication in the Gazette.

I hereby move the motion.

3. Housing fiasco attacked
Michael Ng, The Standard 12 February 2004

The Executive Council decided as far back as November 2002 to negotiate to hand back to developers the failed Hung Hom Peninsula subsidised housing project rather than redeem the land rights, according to lawmakers.

The Hung Hom housing mess, which stands to cost the government HK$800 million, is now in the political arena with Frontier lawmaker Emily Lau wanting to know if the Executive Council was fully aware of the financial implications when it decided to allow the developers to take back the project at less than the original rate.

Lau and other lawmakers met Secretary for Housing, Planning and Lands Michael Suen yesterday to discuss the issue.

After the meeting, Lau said she was frustrated by the answers she received.

``I had asked Suen whether the Executive Council had been briefed on the financial aspects and whether these were contained in the minutes of the meeting,'' she said.

``Instead, I was told that minutes of Exco meetings were confidential. However, I believe the authorities have the responsibility to tell the public why the officials made the decision they did.''

With the clock ticking on the project, the government was backed into a corner and facing litigation from the developer. Therefore, a Housing Bureau spokesman said, the government had no option but to negotiate. Suen said the decision was affected by what was then a gloomy property market.

The SAR stands to lose some HK$800 million by returning the Hung Hom project to New World Development and its new partner, Sun Hung Kai Properties.

The development was to provide 2,470 subsidised flats under the now-abandoned Private Sector Participation Scheme to homebuyers but the flats were to be sold within 20 months of the November 2002 completion date of the development.

When they were not put on offer due to a reversal of the housing policy, the government entered into talks with New World to return the project to the developer.

Wealthy flat owners in Hung Hom had objected strenuously that allowing the subsidised flats to be sold would lower existing home values.

Now Lau and other lawmakers want to know what happened and who is responsible for a costly embarrassment in which the developer may demolish a perfectly good building without any of the intended beneficiaries of the project having a chance to set foot inside the premises.

The government said on Monday it had agreed to forgo the 1.55 million-square-foot project to the developers at a price of HK$1,800 per square foot. This is much lower than the original premium offer of HK$2,300 per square foot.

Property analysts say developers could earn between HK$700 million and HK$1.2 billion if they renovate the 2,470 units and put them up for sale. They may also opt to tear the whole thing down and start over with luxury flats, in which case they could earn as much as HK$2.8 billion.

Instead of paying a premium on the flats, why did the government not just pay the developers the guaranteed HK$1.9 billion to redeem the land rights, Democratic Party vice-chairman Lee Wing-tat said.

``There were no legal or technical obstacles and it was probably the best option to take,'' he said.

``Most surveyors agree that had the land been put up for tender, the government's profit could have been between HK$1 billion and HK$2.5 billion. I don't understand why the government insisted on turning over the project to the developers.''

Lawmaker Lee Cheuk-yan, of the Confederation of Trade Unions, said taxpayers were the losers.

``Taxpayers, the principles of fair play, integrity and transparency were the losers in the saga,'' Lee said, adding he was told the government had not prepared or negotiated a second option with the developers when the contract was agreed.

``This left the government in a disadvantageous position,'' Lee said.

He warned the government to review its current housing policy so as not to be caught out in the future.

Lee is particularly concerned about another looming policy debacle, the 2,010-unit Kingsford Terrace PSPS development in Ngau Chi Wan, which was also built by New World.

As with Hung Hom Peninsula, the government failed to nominate buyers within the agreed time period leaving it liable to pay the developer under the terms of the subsidised housing plan.

The developer is also tipped to reap windfall profits from Kingsford Terrace as the government is expected to accept a premium as low as HK$1,500 for New World Development to take back the project.

Suen said yesterday his bureau had not started talks with developers on the land premium payment for Kingsford Terrace but the principle in handling the project would be similar to Hung Hom Peninsula.

``If the government sticks to its current policy and does not look for another option, we could see a repeat of the Hung Hom fiasco,'' Lee said.