After a comprehensive review of its housing policy, the HKSAR Government announced on November 13 nine measures to restore stability in the property market. These measures, which include halting the Home Ownership Scheme and the sale of public housing, along with a temporary freeze to land sales and railway property developments, have been welcomed by the general public. Although the impact of the measures will not be immediately felt, I believe that over the long run they will help stabilise property prices.

Because the real estate sector is a major pillar of our economy, any instability in it leads to far-reaching consequences. As the administration revealed upon announcing its new measures, property prices have tumbled 62 per cent since their peak in 1997, which has also resulted in 12 per cent deflation over the past four years. This prolonged, serious deflation has already diminished consumer and investor confidence in the economic prospects of Hong Kong, which has inhibited economic recovery as a whole. As such, the government could hardly let the situation go on.

Through these measures, the government also delivered an important message that it intends to withdraw from the property market. As the Secretary for Housing, Planning and Lands Michael Suen said, the SAR Government's future role should principally focus on land supply and provision of rental housing.

I totally support this decision. In my opinion, the government should not sell HOS or subsidised flats built with taxpayers' money at prices lower than those of private housing to pursue its home ownership rate target of 70 per cent. It should, instead, ensure provision of abundant subsidised rental housing for citizens in need. Moreover, with private housing prices close to those of HOS flats and low mortgage interest rates, HOS applicants can already afford to buy private homes. Therefore, the government no longer needs to sell flats.

I disagree with criticisms that these measures are merely designed to benefit property developers. Stabilising property prices will help them, of course, but more importantly, it is instrumental in helping Hong Kong's economy recover. When you consider that developers hold only 70,000 of all flats in Hong Kong, compared with the confidence of investors and of over a million flat owners' families which amount to millions of people, the need to stabilise the property market is obvious.

However, I feel more still needs to be done to restore stability across the whole industry. In my opinion, the Hong Kong Monetary Authority should allow banks to raise the loan ceiling above 70 per cent of flat prices so that banks can be more flexible in granting mortgages.

According to official statistics, alongside a 62 per cent plunge in home prices, interest rates for home mortgages have been slashed from 10.5 per cent (P+1) in December 1997 to the current 2.5 per cent (P-2.5), on average. This means that Hong Kong residents' ability to repay loans has increased by about 73 per cent.

I believe the above nine measures will curb the fall in property prices, and because housing costs and mortgages are more affordable for local citizens, banks' risks are also reduced. The administration should therefore ask the Monetary Authority to raise the existing loan ceiling to add momentum to Hong Kong's economic recovery.

Although the government said that second mortgages granted by some developers and the Hong Kong Mortgage Corporation's Mortgage Insurance Programme amount to more than 70 per cent of flat prices, the former is only applicable to new homes, and the secondary market should apply to the latter. But as the Insurance Programme has many conditions attached, its usage rate remains constantly low. The problem may be solved if the programme can be greatly improved and widely adopted in the secondary market.

I believe such a move will fuel transactions in the second-hand property market and help turn around the economy. I am planning to put forward this proposal to Legco as a motion in mid December for the government's re-consideration.

Among the above measures, freezing land sales will help stimulate property transactions -- albeit to the detriment of the government's coffers. After analysing the pros and cons, however, I believe sacrifices made now in return for a better, longer-term recovery is the right move to make. With an improved economy, the government will be able to increase its income. In the meantime, it should first work hard to trim its expenditure to redress the budget deficit.