XN000022-1981-06-24 — Page 3

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WEDNESDAY, JUNE 24, 1981

MR LIAO NOTED THAT THE LATEST ANALYSIS OF RENT INCREASES REPORTED TO THE RATING AND VALUATION DEPARTMENT UNDER THE ORDINANCE SHOWS THAT THE CONTROLLED RENT OF THE AVERAGE TENANCY HAD FALLEN TO ABOUT 35 PER CENT OF THE FAIR MARKET RENT

A DROP

OF ABOUT FIVE PER CENT FROM THAT NOTED BY THE COMMITTEE OF REVIEW IN EARLY 1980,

+THIS LEVEL OF CONTROLLED RENT RELATIVE TO THE FAIR MARKET RENT IS EXPECTED TO CONTINUE TO DECLINE IF THE PRESENT RENT INCREASE CEILING IS MAINTAINED AT 21 PER CENT EVERY TWO YEARS,+ HE SAID.

+BY RAISING THE CEILING TO 30 PER CENT, IT IS HOPED THAT THE RATE AT WHICH THE CONTROLLED RENTS HAVE BEEN FALLING BEHIND MARKET RENTS WILL BE SLOWED DOWN.+

MR LIAO STRESSED THAT THE PROPOSED LIMIT OF 30 PER CENT, AS AGAINST THE EXISTING LIMIT OF 21 PER CENT, IS THE MAXIMUM BY WHICH A LANDLORD WILL BE PERMITTED TO INCREASE THE RENT OF A CONTROLLED PREMISES.

HE ALSO POINTED OUT THAT IN CASES WHERE THE EXISTING RENT STANDS AT MORE THAN 62-1/2 PER CENT OF MARKET RENT. THE TENANT WILL CONTINUE TO BENEFIT FROM THE FACTOR SYSTEM WHICH HAS THE EFFECT OF REDUCING THE SIZE OF INCREASE PERMITTED BY LAW IN SUCH CASES TO LESS THAN 30 PER CENT.

MR LIAO SAID MOST OF THE NEW TENANCIES WHICH HAVE BEEN AGREED SINCE CONTROLS WERE LAST EXTENDED IN DECEMBER 1979 WOULD BENEFIT FROM THE FACTOR SYSTEM. THE MAXIMUM INCREASE OF 30 PER CENT WILL APPLY MAINLY TO TENANCIES ENTERED INTO BEFORE THAT TIME AND WHICH WILL HAVE ENJOYED RENTS WELL BELOW MARKET RENTS FOR A CONSIDERABLE PERIOD -- PERHAPS SINCE 1973 WHEN THE PRESENT CONTROLS WERE INTRODUCED.+

THE ULTIMATE SOLUTION TO THE PROBLEM, MR LIAO SAID, LAY IN MEASURES TO INCREASE PRODUCTION OF FLATS FOR THE RENTAL MARKET, AND THIS IN TURN DEPENDED ON GREATER SUPPLY OF LAND.

+THE PROPOSED EXCLUSION FROM CONTROL OF NEW BUILDINGS AND LUXURY PREMISES IS INTENDED TO ACHIEVE THIS, BY ENCOURAGING DEVELOPERS TO BUILD MORE FLATS FOR THE RENTAL MARKET, AND TO

INDUCE OWNERS TO RENT OUT THE IR FLATS INSTEAD OF HOLDING THEM VACANT FOR SPECULATIVE OR OTHER REASONS.

+BY THUS HELPING TO STIMULATE THE SUPPLY OF RENTED FLATS THESE MEASURES ARE EXPECTED TO HAVE A POSITIVE STABILISING EFFECT ON THE MOVEMENT OF RENT, HE SAID.

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