HONG Kong's leader-elect yesterday said his government would launch a pilot project to build middle-class housing for residents only, hoping to cool soaring property prices that have sparked a backlash against unlimited sales to overseas buyers.

Leung Chun-ying, who was appointed yesterday by the central government to become the next chief executive of the financial hub, said the idea is to sell land for developments that would be restricted to Hong Kong residents. The government owns all land in the city and sells it on long leases.

"This will be residential land suitable for middle class incomes," said Leung, who takes office on July 1. "It's a political move to address sentiment in the market. It's not going to form the bulk of supply."

But the former land surveyor said his aim was not to depress private housing prices or rents. He faces a stiff test when he takes office, having won a divisive contest.

Low interest rates thanks to Hong Kong's currency peg to the US dollar have led to "hot money" entering the city's open economy, much of it finding a home in residential property.

Leung said he would maintain Hong Kong's policy on its currency peg. "It has served Hong Kong well," he said.

To combat property speculation, Hong Kong has introduced a special stamp duty that places a tax of as much as 15 percent on the quick resale of homes. The Hong Kong Monetary Authority, the city's de facto central bank, also started requiring borrowers to make a 50 percent down payment on homes worth more than HK$12 million (US$1.55 million).

Source:shanghaidaily.com