LegCo Paper No. CB(1) 255/96-97
(These minutes have been seen
by the Administration)
Ref : CB1/PL/HG/1

LegCo Panel on Housing

Minutes of Special Meeting held on Monday, 29 July 1996 at 4:30 pm in the Chamber of the Legislative Council Building

Members present :

Members absent :

Public officers attending : For Agenda Item II

Mr Andrew Wells: Deputy Secretary for Housing
Mr William SHIU Wai-chuen: Principal Assistant Secretary for Housing

For Agenda Item III

Mr Andrew Wells: Deputy Secretary for Housing
Mr Jeremy Croft: Acting Deputy Secretary for Home Affairs
Mr Patrick LIN: Assistant Secretary for Home Affairs
Mr Simon LI: Senior Assistant Director of Housing/Estate Management

Attendance by invitation :
For Agenda Item II
Consumer Council

Mrs CHAN WONG Shui, JP: Chief Executive
Mr LI Kai-ming: Deputy Chief Executive
Ms Vera TAM: Trade Practices Officer

Real Estate Development Association of Hong Kong

Mr Stewart LEUNG: Director & Executive Committee Member
Mr S Y WAI: General Secretary

Clerk in attendance :

Mrs Vivian KAM: Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU: Senior Assistant Secretary (1)3

I. Confirmation of Minutes of Previous Meetings and Matters Arising

II. Consumer Council's Report on "How Competitive is the Private Residential Property Market"

Meeting with the Consumer Council

Meeting with the Real Estate Developers Association of Hong Kong

Meeting with the Administration

I. Confirmation of Minutes of Previous Meetings and Matters Arising

(LegCo Papers Nos. CB(1) 1844 and 1914/95-96)

The minutes of the meetings held on 23 April and 3 July 1996 were confirmed.

2. The Chairman informed members that in relation to the Long Term Housing Strategy Review, the Administration had proposed to brief the Panel on the subject of land supply for housing. Members agreed to hold an informal briefing session on Friday, 9 August 1996, at 10:45 am to which Members of the LegCo Panel on Planning, Lands and Works would also be invited.

II. Consumer Council's Report on "How Competitive is the Private Residential Property Market"

Meeting with the Consumer Council

3. At the invitation of the Chairman, Mrs Pamela CHAN highlighted salient points in the information paper tabled at the meeting. The study conducted by the Consumer Council (CC) concluded that the new residential property market in Hong Kong was not highly competitive and that the concentrated market structure had resulted from a combination of factors including in particular the shortage of land supply. CC recommended that measures such as lowering barriers to entry of new entrants to the market, increasing the substitutability between primary and secondary market housing, safeguarding against possible anti-competitive market behaviour, and facilitating consumers' access to reliable property information should be in place to improve the competitiveness and working of the market.

4. Mrs CHAN also took the opportunity to clarify some misunderstandings on the report. While she agreed to a certain extent with the Real Estate Developers Association of Hong Kong (REDA) that the complexity of the development control mechanism could pose as hurdles to new entrants to the property market, such a mechanism was necessary to protect the public through compliance with statutory requirements, such as on fire and building safety legislation and other environmental conditions. As regards the proposal for the Government to review the size of lots in Government land auctions, Mrs CHAN clarified that the Council referred to both the relative size and market value of the land lots. The scale of sales sites must be manageable to encourage participation of small developers. On the proposed inclusion in the building covenant of a specified period for the newly completed units to be made available to the market, Mrs CHAN explained that this was aimed at seeking an assurance on the timely supply of units for the market. She emphasized that the proposal would not pose any particular difficulties for developers nor would it restrict developers' freedom in deciding on the property prices.

5. A member enquired about the feasibility of introducing restrictive measures such as selective tendering in land auctions to contain the growth of market shares of major developers, and about the anticipated reduction in property prices in the event of full implementation of the report. In reply, Mrs CHAN said that it would be inappropriate to ask the Administration to take drastic actions to interfere with the market situation. It would be in the best interests of consumers for the market structure to be improved through encouraging competition, improving the working of the market and safeguarding against abuse of market power. On the question of property prices, Mrs CHAN emphasized that in a contestable market, developers would be under stronger competitive pressure to realize the development potential of land and to sell the units as soon as possible, resulting in more choices and stable property prices for purchasers.

6. Members were worried that purchasers of properties of 10 years or more would have difficulties in obtaining home mortgage when compared with purchasers of new properties. Mrs CHAN advised that the distinct segregation of the primary and secondary housing markets by age was attributed to the poor tradability of older housing units. Under such circumstances, financial institutions tended to adopt lower valuation than the market value of the properties when assessing mortgage risks and impose harsher terms and conditions on mortgages for older buildings. To improve the situation, Mrs CHAN welcomed the proposal of the Hong Kong Monetary Authority for setting up a Mortgage Corporation to promote home ownership and mortgage securitization and to facilitate the development of a secondary mortgage market. Mrs CHAN also found the building certification and warranty programmes suggested by the Institute of Surveyors useful in enhancing the long-term sales value and tradability of buildings.

7. Members sought elaboration on the proposed competition law and its similarity with the one advocated by Hon LAW Cheung-kwok. Mrs CHAN advised that CC was still considering the need for a competition law and a decision had yet to be made.

Meeting with the Real Estate Developers Association of Hong Kong

8. Mr S Y WAI considered that while CC's study had accurately identified a number of elements which contributed to the success of the property market such as the non-existence of legal barrier to entry, the analysis on the primary and secondary markets was inaccurate as the former only accounted for about 10% of the private housing market which was far below the level of 30-40% as quoted in the report. Mr WAI also expressed grave reservations over the proposed introduction of a further deadline on the timing of sale in the building covenants since businessmen would be deprived of the opportunity of making sensible business decisions in response to market conditions.

9. Responding to CC's comments on the development control mechanism, Mr WAI said that developers were generally supportive of the system, in particular the requirements of the fire and building safety legislation and environmental conditions, but considered a need to streamline these procedures. Mr WAI added that REDA had no objection to the proposed review on the size of lots in land auctions, but was concerned that this might not be in the best interests of consumers since the increased demand for well-designed, well-built and large estates with full amenities could not be achieved through smaller lots.

10. Commenting on Hon Albert CHAN Wai-yip's suggestion for imposing further restrictive measures, Mr WAI cautioned that any attempt to interfere with the prevailing property market structure would inevitably affect the macro economy of Hong Kong as land sales together with property disposal had been ranked as the second-largest component and accounted for about 30% of total Government revenue.

11. In reply to members, Mr Stewart LEUNG considered it inappropriate to comment on the proposed competition law at that stage. Mr WAI cautioned that the private property market should not be affected by the competition law.

Meeting with the Administration

12. In response to the Chairman, Mr Andrew Wells advised that the Administration maintained a neutral stance on the recommendations in the report. Public opinion was being collated during the consultation period, and a formal response to the report would be published within six months. On members' concern on the required period of six months, Mr Wells explained that this was necessary since public consultation alone would normally take two to three months; this would then be followed by an analysis of opinions collated. Mr Wells added that this was the same standard adopted by the Secretary for Trade and Industry in responding to each of the competitive studies reports produced by CC.

13. Members were not optimistic that the target of producing 195,000 private flats between April 1995 and April 2001 as pledged in the 1995 Policy Commitment could be met since the supply of private flats had consistently fallen short of the target. They enquired if the shortfall was due to constraints in land supply and sought clarification on the role of the Administration in monitoring the production of private housing units. Hon Albert CHAN Wai-yip also considered a need for the Administration to improve its forecasts on housing demand and production. In reply, Mr Wells acknowledged that sufficient land supply was vital to the private housing sector and the Housing Branch was working closely with the Planning, Environment and Lands Branch with a view to obtaining more land either through land formation or urban renewal programmes. To facilitate members' understanding on the Administration's efforts in producing more new land, Mr Wells undertook to provide information in this respect. Mr William SHIU supplemented that requests for more residential land had been submitted to the Sino-British Land Commission for consideration. The Housing Project Action Team was also committed to ensuring that land was converted into available housing units as efficiently as possible. 56 major private housing projects capable of producing about 120,000 private flats had been processed so far, and the Administration was confident that the 2001 target could be met. On the role of the Administration in monitoring the production of private flats, Mr Wells advised that since the operation of the private property market was market-driven, it would be inappropriate for the Administration to interfere with commercial decisions. As regards the discrepancy between estimated and actual private housing supply, Mr Wells attributed this to the bunching effect and agreed to provide in due course a comparison between the actual and estimated number of private flats produced. On the last point concerning forecasts on housing demand, Mr Wells assured members that the accuracy of future forecasts would be much improved with the adoption of the Housing Demand Model.

HB
HB

III. 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

14. Members considered that the content 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 did not reflect the actual situation in Hong Kong as far as housing-related aspects were concerned. The report was too optimistic and had avoided reference to problem areas. Members quoted a number of relatively major housing-related issues which had been omitted or misrepresented in the report. These included:

Paragraph	Omission/Misrepresentation
174	The actual number of inadequately housed households was much higher than 181,000.
175	Omission of reference to the delay in the production of 310,000 public sector flats between 1995 and 2001, and the pledge to clear the General Waiting List for public housing by 1997 under the Long Term Housing Strategy.
191	The actual average waiting time for public housing was seven years instead of the said two to seven years.
204	The delay in squatter clearance, in particular those built on mixed crown/private land, had been omitted.
210	The retention of 13 temporary housing areas had been omitted.
215	The deferred implementation of the Bedspace Apartment Ordinance to 1998 had been omitted.
220	The pledge to produce sufficient elderly homes by 1997 to accommodate applicants who had registered before 1993 had been omitted.

Members also considered that the report failed to take into account changing social factors such as the influx of legal immigrants from China.

15. Mr Wells took note of members' views but emphasized the need to strike a balance in the report in presenting different situations. On the reliability of data in the report, Mr Wells assured members that the figures were of high accuracy as these were based on information obtained from the Census and Statistics Department. Mr Jeremy Croft supplemented that the report only reflected the position as at July 1995 and any subsequent progress had not been included.

16. Members sought clarification on the rationale for declining the recommendation in the Concluding Observations of the United Nations' Committee on Economic, Social and Cultural Rights (the Committee) in the second periodic report to embody the right of housing in the domestic law of Hong Kong. As the Committee had raised concern on the issue of bedspace apartment, members cautioned that the slow progress by the Administration in tackling the problem would attract criticisms in the forthcoming Hearing of the Committee in November 1996. In referring to paragraph 217 of the report, members questioned the authenticity of the statement "The Hong Kong Government intends to provide decent accommodation to all bedspace lodgers' by 1997" since the sentence was at variance with the existing housing policy that only elderly lodgers aged 58 and above could apply for rehousing to public housing flats. Members were of the view that the word "provide" in particular was arguable as many bedspace lodgers would have to acquire their own accommodation.

17. Mr Wells said that the Housing Branch was working with both the Home Affairs Branch and the Health and Welfare Branch with a view to updating the position of rehousing programme for bedspace lodgers in the report. Mr Wells added that the provision of decent accommodation for all elderly people living in bedspace apartments remained one of the paramount goals of the Administration as pledged in the 1995 Policy Commitments. Mr Patrick LIN supplemented that the objective of the Bedspace Apartments Ordinance was not to phase out or outlaw this type of accommodation, but to provide for a licensing scheme to regulate the fire and building safety of bedspace apartments. The Administration was committed to ensuring that no lodgers would be rendered homeless as a result of the implementation of the licensing scheme and had taken necessary steps to ensure that alternative accommodation would be available to those affected. These included compassionate rehousing to public rental units for elderly lodgers aged over 60 and admission to singleton hostels for the other displaced lodgers. However, it was envisaged that a few hundred lodgers would still be living in licensed bedspace apartments after full implementation of the Ordinance in 1998.

18. In referring to paragraph 229, members found it difficult to accept that the phasing out of rent control would not cause undue hardship to tenants concerned and that the average monthly rent for controlled premises would only be $500 less than that for uncontrolled ones by 1997. They considered a need for the Administration to conduct surveys on both rental increase for controlled premises over the past few years and tenants' affordability to ascertain the effect of the phasing out of rent control. Members were not convinced that property owners affected by the urban renewal schemes of the Land Development Corporation (LDC) had been given the option of participating in the risks and rewards of the projects as stated in paragraphs 237 (a) and (b). Such an option was only being considered in one project under LDC schemes. Some members also urged the Administration to provide more information in paragraphs 248 and 249 concerning land supply. Mr Wells took note of members' views and affirmed that the wordings in the report could be improved in order to present a more balanced picture.

19. Before concluding, the Chairman reminded members that as a delegation of the Legislative Council would be attending the UN Hearing in November 1996, any views concerning the third periodic report should be directed to the Chairman of the LegCo Panel on Home Affairs for consolidation before submission to the Committee.

20. There being no other business, the meeting closed at 6:45 pm.

Legislative Council Secretariat
5 November 1996

Last Updated on 20 Aug, 1998