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Managing the property market

In view of the under-supply of housing in the short term and to satisfy first the housing needs of local people and home buyers, the Government rolled out a few months ago two measures to curb the demand for flats from people who are not Hong Kong permanent residents and those who buy property for investment and speculation. These two measures have been commonly referred to as "spicy" measures.

Since their implementation, these measures have allowed Hong Kong to buck the trend of property prices rising at a weekly rate of 1 per cent to 2 per cent. Seeing both property prices and transactions falling, some people suggest that the Government should reduce the "spiciness" of these measures.

I want to reiterate that although property prices have dropped, new housing supply has not yet materialised. So the Government will not relax the "spicy" measures.

Should these measures be relaxed, property prices would probably get back on the upward track and the affordability ratio would deteriorate. This would undermine the stability of the financial market and give rise to many problems again. As you may know, it is better to increase the supply than to manage the demand. With greater supply, we can reduce our efforts to suppress demand. Therefore, instead of asking the Government to reduce the "spiciness" of the measures, we should work together to increase land and housing supply. Not until the supply has increased significantly can and will the Government loosen its grip on housing demand.

June 14, 2013