🚀 go-pugleaf

March 2, 1999

Hong Kong's government next month is to resume land sales for property
development, after a nine-month moratorium.  The move is seen as a way to
boost revenue and restore confidence in the financially troubled sector.  The
resumption of land sales will be a good barometer for determining whether
Hong Kong is recovering from its worst economic downturn in years.

Hong Kong's property market is a vital part of the economy, accounting for a
third of the territory's gross domestic product.  But the Asian financial
crisis battered the property market.  It has caused housing prices to drop by
more than 50 percent, leaving many residents with negative asset value in
their homes.

The falling property market has also hurt share prices on the local stock
market, which is made up of mostly blue chip property development companies.
In an effort to prevent a further downturn in the property market the
government decided to halt future land sales in late June.  In Hong Kong, the
government can effectively control property prices by deciding the timing of
land released for private development.

Secretary for Planning and Lands Gordon Siu says the main objective in
resuming land sales next month is to ensure stability and future growth in
the property market.

"Stability is very important from the point of view of at least all those who
own property, those who want to own property and those who want to in fact
invest in property."

In the past, the government has been accused of selling off land too cheaply.
It has installed new procedures, officials say will end such criticism.  The
government has lost nearly $4-billion (U.S.) in revenue since Hong Kong
stopped selling land, contributing to a budget deficiet in the new fiscal
year. Officials expect the new sales will bring in $3-billion (U.S.) over the
next year.

In addition to shoring up government finances, many analysts and property
developers say resumed sales will help boost property prices and speed up Hong
Kong's economic recovery.  But analyst Ambrose Chang, of Daiwa International
Management disagrees.  He says putting more land up for sale will do little to
lift Hong Kong's sluggish property sector.

"Do not forget that Hong Kong is still in a deflationary environment.  With
conditions as they are now it is very difficult for asset values in property
to go up."

The government says with next month's resumption of land sales, it should be
able to meet its goal of supplying 50,000 new housing units a year.  Officials
say the move will help ease Hong Kong's massive housing shortage and provide
jobs for the ailing economy.

Meanwhile many property developers have been anxious for government land sales
to begin again.  However, it remains to be seen just how many new projects
property developers are silling to undertake with the Asian financial crisis
still gripping the territory.

Global Investing News at
http://www.cyberhaven.com/globalinvesting/


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