2. As a Working Group was normally of relatively short duration and its proceedings were not protected by the Legislative Council (Powers and Privileges) Ordinance, members agreed to re-title the Working Group as the Subcommittee on Long Term Housing Strategy Review. The terms of reference would be "to conduct researches and to monitor the Long Term Housing Strategy Review", while the quorum would be three members for the five-member Subcommittee.

Joint Panel meeting on Territorial Development Strategy

3. The Chairman reminded members of the joint meeting of the Panels on Housing, Transport, Environmental Affairs and Planning, Lands and Works on Tuesday, 16 July 1996, at 10:45 am on the subject of Territorial Development Strategy.

Special meeting

4. It was agreed that a special meeting would be held on Monday, 29 July 1996, at 4:30 pm to discuss the following:

- Housing-related aspects of the Third Periodic Report in respect of Hong Kong under Articles 2 to 16 of the International Covenant on Economic, Social and Cultural Rights; and

- the Consumer Councils report on "How Competitive is the Private Residential Property Market".

II. Abuse of Property Sales System

(Appendices II, III and IV of LegCo Paper No. CB(1) 1792/95-96)

Meeting with the Administration

5. Mr Andrew Wells said that the Administration was aware of the abuse of the property sales system by speculators who put in applications for purchase under the names of registered companies, and subsequently made profits through transferring ownership of the companies and the properties. However, he stressed that the trading of properties by companies were part of the normal activities in a business community and that not all companies were involved in speculation. Referring to the latest statistics on speculative sales through companies, Mr Wells said that the number of sales fluctuated and there was no apparent trend that such sales were on the increase.

6. Mr Wells added that the Administration was exploring the possibility of introducing transfer duty which would be payable upon the transfer of share capital of a land-holding company. This could maintain the flexibility in business practices while at the same time deter speculative activities in the sale and purchase of properties through companies. Mr Wells said that this was a preliminary proposal on which LegCo members and the public had yet to be consulted. Mr WONG Ho-sang supplemented that the conceptual proposal of imposing transfer duty was modelled after a similar system in certain European countries whereby owners of land-holding companies were required to inform the authorities concerned of the transfer of share capital in the land-holding companies. The proposed transfer duty would be in the form of stamp duty payable at 2.75% of the "assessable value" of the transfer calculated on the basis of the market value of landed properties of the land-holding company, in the proportion of value of shares transferred to the total issued share capital of the company. Exemptions would be granted to public listed companies and their subsidiaries where the transfer of shares were already subject to stamp duty. The transfer of share capital of companies with substantial holding in properties for business use, such as for operating restaurants, would also be exempted from transfer duty.

7. While accepting that transfer duty might be effective in deterring speculative activities, a member asked whether consideration would be given to levying profits tax which would be a more effective deterrent. In response, Mr WONG said that under the present tax system, tax was not levied on land appreciation nor capital appreciation, and profits tax would not normally be charged on the sale and purchase of properties held as capital investment. However, efforts would be made to track down on speculative activities involving sale of properties as a trade or an adventure in the nature of trade through the transfer of shares of registered companies, and profits tax would be charged on these companies.

8. As to the extent of speculative activities involving transfer of company shares, Mr WONG referred members to the figures at Appendix IVa and IVb which showed that out of 94,881 transactions from April 1995 to March 1996, the number of speculative transactions involving transfer of company shares was only 1,352. In view of the relatively low percentage of cases, the problem was not considered serious at the present stage.

9. Members expressed concern about the circumvention of transfer duty by multi-tiered holding companies, some of which were registered overseas and were outside the ambit of the Hong Kong tax system. Moreover, there were also speculators who evaded the payment of duty by trading off-shore. Mr WONG concurred that these were technical difficulties which would have to be resolved, and that enabling legislation would need to be introduced for effective control of the situation.

Meeting with the Real Estate Developers Association (REDA)

10. In response to the Chairman, Dr K S LO said that REDA was against implementation of the proposed transfer duty system on the grounds that:

(a) there were technical difficulties in imposing transfer duty and a complicated tax system would have to be devised to counter all forms of circumvention; and

(b) the introduction of transfer duty on the transfer of share capital of land-holding companies would have serious implications on the shares market and would undermine the competitiveness of Hong Kong as an international financial centre.

He emphasized the need to arouse public awareness of the risks of hidden liabilities and additional legal and financial costs incurred in buying properties through limited companies. He supplemented that REDA would lend its support to the Government in such promotional efforts.

11. The Chairman advised that the Democratic Party was examining the proposal on transfer duty and would provide a response to the Administration in due course.

III. Five-year Comprehensive Redevelopment Programme

(Appendices V and VI of LegCo Paper No. CB(1) 1792/95-96)

12. At the invitation of the Chairman, Hon Fred LI Wah-ming briefed members on his report entitled "Consolidated Briefing on the Redevelopment and Planning of Public Housing". Mr LI said that the delay in completion of the Comprehensive Redevelopment Programme (CRP) from the year 2001 to 2005 had significantly affected tenants concerned; an example was the redevelopment of Blocks Five and Six of the Lam Tin Estate which had been deferred by one year to 2000-01. Mr LI pointed out that due to a shortage of three-bedroom flats in redeveloped housing blocks, households with over seven members were forced to move to other districts. He questioned the reliability of computer balloting in the allocation of flats in view of the limited supply of housing units available.

13. Mr Wells advised that the Administration was committed to redeveloping all non-self-contained flats before the year 2001 and was confident that CRP would be completed by 2005. Members re-iterated the need to expedite CRP which was essential for effective utilization of land and expedient provision of housing units. They also expressed concern over the shortage of suitable flat sizes of reception units for large households who were forced to take up either flats in other districts or two small units in the same district. Members considered that comprehensive researches should be conducted to match the demand for re-housing locally with the sufficient supply of reception flats.

14. Ms Aileen Simister explained that as planning was made at an early stage, it was difficult to predict the actual demand of flat sizes in redevelopment projects, particularly when units were designated for reception purpose at a much later stage. Nevertheless, the Administration would re-examine the situation with a view to providing a better combination of units for tenants. On re-housing arrangements, Ms Simister emphasized that while every effort would be made to meet the demand of tenants concerned, there was no guarantee for local re-housing. By way of illustration, about 91% of affected tenants had so far been re-housed within the same district while the remainder were relocated elsewhere, some to their own choice of districts. At members request, Ms Simister agreed to consult relevant District Boards in the event of changes to the programmes of redevelopment projects.

IV. Housing Policy for New Immigrants from China

(Appendices VII and VIII of LegCo Paper No. CB(1) 1792/95-96)

15. In response to members, Mr Wells advised that the housing need of new immigrants from China would be considered in the context of the review on Long Term Housing Strategy. In parallel with the review, the Housing Branch was working closely with the Planning Department with a view to increasing land supply for housing to meet the needs of these immigrants in the long term.

16. On the addition of family members from China, Mr CHENG Yao-kong advised that new immigrants who were dependants of applicants already on the General Waiting List would be included as family members in the allocation of flats provided that the majority of family members were able to meet the seven-year residential rule. Immigrants who were dependants of existing tenants in public rental housing were allowed to join their families, and could apply for re-allocation to larger flats if such additions resulted in overcrowded living conditions. Mr CHENG supplemented that applications for addition of adult family members to tenancies of elderly households in public rental housing units would need to be carefully assessed to avoid queue-jumping as elderly tenants were accorded priority in housing allocation under the Elderly Priority Scheme. In reply to a related question, Mr CHENG said that the policy for two single and unrelated non-elderly persons to share a public rental unit had been abolished. Mr CHENG also asked members to amend the word "Central" in paragraph 7 of the information paper at Appendix VIII to "Kowloon".

17. Some members considered that the residential requirement for public housing should be relaxed from seven to five years. This was on account of the Administrations proposed reduction in waiting time under the General Waiting List, the fact that some social services were provided earlier than seven years, and that some local residents were allocated public rental housing in five years or less. A member was worried that the current policy would encourage pregnant wives in China to come to Hong Kong illegally to give birth in order for their children to qualify for the seven year eligibility criteria. Mr Wells stressed that the seven-year rule was the basis for determining permanent resident status and that the proposed relaxation would have serious implications on housing and other resources. Mr CHENG supplemented that the intention behind the residential requirement was to ensure that the scarce housing resources would be allocated to meet the needs of permanent residents as a matter of priority. However, special consideration had been given to applications for public housing from elderly couples where only one family member was required to meet the seven-year rule.

V. Operation of the Land Development Corporation

(Appendix IX of LegCo Paper No CB(1) 1792/95-96)

18. With the aid of an overhead projector, Ms Holly LAU briefly explained the current work programme and future targets of the Land Development Corporation (LDC) and progress of various urban renewal projects.

19. Members sought clarification on the mode of co-operation between LDC and private developers. They also asked whether business accounts in respect of the eight completed urban renewal projects involving private developers could be released.

20. Mr Abraham Razack advised that owing to resource constraints, LDC had relied heavily on joint ventures with private developers in undertaking urban renewal projects. The award of joint venture contracts were made through open tendering and private developers engaged in these projects were required to pay front-end deposits for financing community facilities; guarantee the financial viability of the projects; finance the entire projects and share profits equally with LDC. On the proposed disclosure of business accounts, Mr Razack advised that it would be inappropriate for LDC to unilaterally release the accounts without prior consent of the developers concerned. However, Mr Razack advised that the accumulated profits for the eight projects which had been completed amounted to about $550 million for LDC.

21. On members concern about the delay of the urban renewal projects at Kennedy Town and the Seventh Street in Tsuen Wan, Mr Razack advised that while LDC was committed to these projects, their financial viability had yet to be worked out with the Administration. At members request, Mr Razack welcomed the opportunity to discuss the two projects with interested members after the meeting. Mr C F MAK supplemented that a few pilot schemes would have to be conducted and the approval of Executive Council would have to be sought for the projects. In view of the dilapidated conditions of the areas concerned, members pressed for expedition of the renewal projects.

22. In reply to members, Mr Razack explained that a freezing survey would be conducted upon the gazettal of projects by the Town Planning Board and residents affected would be notified through respective District Boards. At the conclusion of the discussion, Mr Razack extended an invitation to members of the Panel for a visit to LDC.

23. There being no other business, the meeting closed at 6:30 pm. Legislative Council Secretariat
12 November 1996

Last Updated on 20 Aug, 1998