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1. Shoddy buildings in the firing line

2. Further intervention on housing is ruled out

3. A welcome step towards a better urban lifestyle

4. Supply of flats set to ease only slightly

5. Demand for HK dollars growing in mainland

6. Numbers game taints picture on housing

1. Shoddy buildings in the firing line
CHLOE LAI, SCMP 12 May 2003

All residential blocks in Hong Kong would be required to set up an owners' corporation and appoint a property manager under proposals to be drafted by officials to improve the quality of buildings.

Secretary for Housing, Planning and Lands Michael Suen Ming-yeung told the South China Morning Post yesterday all buildings also would be graded on their quality of maintenance.

A consultation exercise would take place at the end of the year to collect public views on how to tackle the problem of poor management of ageing buildings.

About 50,000 buildings do not have an owners' corporation.

According to the government figures, the city has about 10,000 blocks that are at least 30 years old and many are poorly managed.

Mr Suen said the government was studying policies and laws on building management in other countries. He cited the Canadian model, under which owners of all buildings have to form a committee and appoint an agent to look after maintenance.

He said the grading system, which would be carried out by authorised professionals, would give owners another incentive to keep their properties in good shape as this would increase their value.

The policy also would boost the economy by creating jobs for construction workers.

Mr Suen said those who failed to comply with the new rules would face heavy penalties.

He knew it would be difficult to enforce the new policy because of the financial implications for property owners. But he believed more people would realise the importance of building management and maintenance in the wake of the Sars outbreak.

"Our major concern is the acceptance of property owners because they are the people who pay for the management and maintenance," Mr Suen said.

"Of course, we understand there are people who have genuine financial difficulties. In such cases, the government will provide assistance."

2. Further intervention on housing is ruled out
CHLOE LAI, SCMP 12 May 2003

The government will not intervene in the Hong Kong property market again even if the current fall in prices continues, the secretary for housing, planning and lands says.

Michael Suen Ming-yeung told the South China Morning Post yesterday the administration's role in the market was to ensure sufficient land supply to developers.

It should be left to the market to determine any rise or fall in property prices.

"There will not be any further measures to stabilise the market. What else can we do?" he said.

Mr Suen also rejected suggestions from some property agents for a further relaxation in anti-speculation measures, such as the present arrangement where stamp duty is paid once a temporary contract is signed.

When asked whether land sales would be resumed in November, Mr Suen said they would resume on schedule that month but it would be left for the market to decide whether developers applied for sites for sale.

He said people would not decide to buy flats because of a change in transaction rules.

In November, Mr Suen announced a nine-point package to revive home prices, which have dropped more than 60 per cent since the handover.

The measures included a halt to land sales for 12 months and the suspension of the sale of subsidised Home Ownership Scheme flats. Auctions initiated by applications from developers would also be the sole method of disposing of land.

Mr Suen said at the time that it might take up to a year to prove that the measures were working.

But home prices have fallen a further 7.6 per cent in the first quarter of this year and are widely expected to drop further in view of the Sars outbreak.

Mr Suen admitted his initial forecast had been too optimistic and that there was a serious over-supply in new residential properties. Such an imbalance would take time to improve.

The Hong Kong Property Review 2003, released by the Rating and Valuation Department last week, reported that Hong Kong's stock of unsold new flats increased from 60,500 in 2001 to a record 74,200 last year.

Market observers said the figure would probably increase to 90,000 by the end of the year.

The worst case came in the Island district, including Tung Chung, Ma Wan and Discovery Bay, where a quarter of the new flats, or 8,631 apartments, are empty.

The report said 34,000 flats were completed last year, forcing developers to cut prices and adopt aggressive promotion strategies.

A further 30,500 apartments are expected to be built this year.

The Hong Kong Monetary Authority announced on Friday that the number of residential mortgage loans in negative equity had increased 7 per cent in the first three months of the year, from 77,935 to 83,177, with a value of $135 billion.

Mr Suen declined to say when the market would bottom out, but said he was optimistic that there would be a rebound.

"What comes down must go up," he said.

He added that public confidence in the property market would be restored when the economy recovered.

3. A welcome step towards a better urban lifestyle
SCMP, 12 May 2003

Suddenly a dripping pipe or a blocked drain - for so long blithely dismissed as a feature of Hong Kong life - is a menacing sight. Since the Sars tragedy at Amoy Gardens was linked to a faulty sewerage system, a profound new awareness towards public sanitation is sweeping the city.

Hong Kong has long led the world in terms of the proportion of its population living in high-rise apartments, easily topping 90 per cent. It hardly leads the globe, however, when it comes to the health issues that surround that urban lifestyle. The hard work is only just beginning.

Today this newspaper reports that the government is launching a drive to get ahead of the issue after years of half-measures and bureaucratic wrangling. Secretary for Housing, Planning and Lands, Michael Suen Ming-yeung will be focusing on building management and maintenance. Firm consideration is being given to making owners' corporations and the appointment of a management agent compulsory - moves backed by a tough penalty regime against buildings which fail to enforce basic standards. Buildings will also be graded accordingly, something which may also provide a timely "carrot" to force action, giving owners a clear rental incentive. Enforcement proposals are due to be put up for public discussion by the end of the year.

Mr Suen's ideas are certainly ambitious. He has mentioned estimates of some 50,000 buildings falling under the government's spotlight - a figure far beyond the 10,000 or so buildings older than 30 years that currently attract most of the attention.

If Mr Suen can get to grips with the problem, he will be achieving something that has eluded his predecessors for years. Decades of laisse-faire policies has placed extensive rights in the hands of individual property owners. This has meant entire apartment buildings and tenements where there is little if any communication or joint action between dozens - if not hundreds - of individual owners. Public areas - stairs, lobbies and light-wells - go untouched for years. No one takes responsibility for anything beyond the threshold of their own perch. Previous efforts to encourage owners to form corporations have struggled to make an impact, with many landlords in poorer areas uninterested or unwilling to take on new responsibilities.

These owners will represent the biggest challenges for Mr Suen and his team in the months ahead. A stroll through the poorer quarters of any of Hong Kong's older areas such as To Kwa Wan or Kwun Tong will provide ample evidence of the tough task, given the dripping alleys and cluttered stairs.

Early signs suggest Mr Suen is less than keen to include direct funding as part of his scheme, beyond expanding government loan assistance for building up-grading. He is right to do so. The drive for improvement must come from the building owners themselves. There may be extreme cases, however, where the owners come together to decide that a building would be better destroyed or completely renovated rather than brought up to new legal standards. In such cases the government, through the Urban Renewal Authority, should be ready to be flexible in terms of relocation assistance. It must be remembered these are private buildings in disrepair and that the law already provides for compensation to owners of buildings targeted for development by the authority.

If it is successful, Mr Suen's plan will drag many of Hong Kong's slum areas into the 21st century. Just as great strides have been made in previous decades in clearing squatter camps, now new efforts are needed to lift standards in poorer and more congested apartment areas. Sars has shown that our lives depend on it.

4. Supply of flats set to ease only slightly
KENNETH KO, SCMP 12 May 2003

Residential supply in Hong Kong will decrease modestly in the next three years but still be higher than the average annual completions in the past decade, according to the Rating and Valuation Department.

Last year, 34,040 private housing units were completed, the highest figure since 1999 when 35,320 units were completed.

Completions are expected to decrease to 30,500 units this year and 27,700 in both next year and 2005.

Over the 10-year period to 2001, average annual production was 25,800. The New Territories will provide the bulk of new supply in the next three years.

The department's estimates show 54 per cent of the completions this year will be in the New Territories and 37 per cent in Kowloon. Their respective contributions will be 41 per cent and 37 per cent next year and 64 per cent and 28 per cent in 2005.

Analysts generally expect prices in the New Territories will suffer more in the coming years due to the larger supply.

The abundant supply last year was unmatched by demand, which was adversely affected by the rise in unemployment, pay cuts or the freeze in salaries, according to the department.

Only 19,900 new flats were absorbed, which pushed the vacancy rate up to a record 6.8 per cent or 74,200 unoccupied units, at the end of last year. This compared with 5.7 per cent or 60,410 unoccupied units at the end of 2001.

In the breakdown of statistics, the vacancy rate of small- to medium-sized flats rose from 5.6 per cent to 6.6 per cent, with 66,690 unoccupied units. The vacancy rate of large flats jumped from 7.3 per cent to 9.3 per cent, with 7,510 unoccupied units. Yau Tsim Mong district had the largest number of vacant units at 9,313, mainly involving properties in West Kowloon reclamation and Tai Kok Tsui.

5. Demand for HK dollars growing in mainland
RAYMOND MA, SCMP 12 May 2003

The non-convertibility of the yuan has helped fuel a demand for Hong Kong dollars, according to a paper published by the Bank for International Settlements.

Demand for Hong Kong currency on the mainland had increased steadily in recent years, despite the fact that the yuan gained popularity in the region in the 1990s due to the relative strength of the mainland economy, the Hong Kong Monetary Authority's head of economic research, Peng Wensheng, said in the paper.

According to the paper, the net inflow of Hong Kong dollars into the mainland seemed to have reversed in recent years.

Mr Peng estimates that 15 to 25 per cent of the total outstanding stock of Hong Kong dollars - or HK$21 billion as of June last year - is in offshore circulation. This compares with HK$20 billion and HK$18 billion at the end of 2001 and 2000 respectively.

"The unabated demand for Hong Kong dollars in the face of a stable yuan probably reflects a combination of factors," Mr Peng said.

"Holdings of Hong Kong dollar banknotes . . . represent a means of accumulating foreign assets for some individuals and businesses firms on the mainland."

Daily transactions in Hong Kong dollars have also increased as capital controls have eased.

6. Numbers game taints picture on housing
JAKE VAN DER KAMP, SCMP 12 May 2003

Here is another issue that just tempts me too much to stick in my oar. It involves government housing policy and games with numbers.

On Tuesday last week we carried a leader - Quality of life in HK paramount to success - lamenting that Tseung Kwan O has become overcrowded with new residential blocks because planning densities there were raised with Chief Executive Tung Chee-hwa's big push (now moribund) to build 85,000 new homes a year. Tseung Kwan O has recently been cited as an area under study for a cut in population density.

This leader prompted a letter to the editor, published on Friday, from Dr John Bacon-Shone, the director of the Social Sciences Research Centre at the University of Hong Kong. He said he agreed but then added that we had missed a critical point about changing population growth.

"In 1997, the population growth rate of Hong Kong was estimated at 3 per cent per year, which required a big investment in housing. So the chief executive's push to build more housing was a sensible response.

"However, the chief executive also asked some important questions about population change and growth, which can be seen with hindsight to have been very wise. The population growth rate is now under 1 per cent, which allows rethinking of planning density."

First thing is first. This is fulsome praise indeed for Mr Tung. How interesting then to note that Dr Bacon-Shone is also a full-time member of Mr Tung's Central Policy Unit. This affiliation was not disclosed in the letter. Oh well.

Now to the real twist. In 1997 the Census and Statistics department adopted a new way of calculating the census. This method is called "resident population" and its purpose is to count the number of people who are actually resident in Hong Kong, which means excluding people who may call the territory their home but do not actually spend much time here, and including people who hail from abroad but have made the special administrative region their home.

I shall not go into the statistical details of how these categories are determined. The point is that we have adopted the new method and the chart shows you what has happened in the official population growth figures.

The red line represents the old way of counting. That big spike in 1979 was the result of a flood of illegal immigrants from China who managed to secure residency through the old Touch Base policy - put your foot on the southern side of Boundary Street in Kowloon and you are home free, here is your ID card. This policy was understandably scrapped very soon after.

Do not ask me what that up and down jiggle in 1991 and 1992 represents. I do not know and I have always assumed it is just a statistical error. The important thing is the trend just before the old method of counting came to an end. Dr Bacon-Shone is quite right. Population growth in 1997 was 3 per cent, in fact slightly more than that, says the red line.

And now turn to the blue line, which represents the resident population method of counting population growth. It says that the growth rate in 1997 was only 0.77 per cent. It also says, of course, that the growth rate last year was 0.84 per cent and Dr Bacon-Shone is thus once again absolutely right in saying that population growth is now under 1 per cent.

So where do you want him right and where do you want him wrong? It seems we have a lot of astronauts in this town and, if they do indeed spend more time away than they spend here, then resident population is certainly a better way of counting heads for the purposes of projecting housing demand.

But we cannot assume that population growth on a consistent basis was 3 per cent in 1997. We had those same astronauts then too. The difference is only that we included them in the 1997 population count but now we have thought the better of this and no longer do so.

As Dr Bacon-Shone's letter points out in reference to a related matter, "we must avoid simplistic assumptions".

Exactly, sir, and professional statisticians such as you should particularly avoid them. Email Jake van der Kamp at jakeva@scmp.com.