HONG KONG - With an "improved electoral system" where only patriots rule, Hong Kong's leader says the government will be more efficient when it comes to solving the housing crunch, in a sign that it wants to take the bull by the horns.

Chief Executive Carrie Lam on Tuesday (Sept 21) made the point when asked to respond to a Reuters report last week that Chinese officials told Hong Kong tycoons in closed meetings this year that they should back Beijing's interests and help solve the housing shortage.

Mrs Lam declined to comment on the report, calling it "rumours".

"All I can say is that the central government attaches great importance to livelihood issues in Hong Kong. With the improved electoral system, the efficiency of governance of the Hong Kong government should be enhanced," she said.

The Chief Executive went on to say that with the policy changes instituted by the current government, including the introduction of starter homes and beefing up of the home ownership scheme, "we are now tackling the problem of land supply".

Mrs Lam noted that some of the land is held by developers but said that if needed, the government can take back private land under the law.

"I believe they (developers) are willing to support the government's land policies, such as the land sharing scheme. We are sharing the use of land on a 70-to-30 per cent basis, so of the 15,000 committed transitional housing units, more than half the land were loaned to us for free by developers," she added.

Under the scheme that initially received lukewarm response when it was rolled out in May 2020, developers can apply to build on a higher percentage of open land. But they must use at least 70 per cent of the extra floor area for public housing, while the remaining 30 per cent can be for private units.

Hong Kong is home to some of the world's priciest properties, with unaffordable housing and a lack of supply contributing to deep-seated unhappiness among residents.

The home ownership ratio in Hong Kong fell to a 20-year low of 49.8 per cent in 2019, after a nearly fourfold surge in flat prices in 15 years. It rebounded to 51.2 per cent in late 2020 but is still far below the 60 per cent mark seen in affluent economies.

The housing woes are viewed by Beijing to be a root cause for the 2019 anti-government protests in Hong Kong.

Many of the city's magnates have benefited from the booming property market that has created sprawling and quasi-monopolistic real estate groups that can put in high bids at land auctions.

Beijing has sought to curb the tycoons' power.

Under the city's new electoral system where the powerful Election Committee picks the city's leader and part of parliament, its membership was expanded to 1,500 from 1,200. But business leaders and property magnates were given fewer seats at the table.

Dr Willy Lam, long-time China observer and author of books on the Communist Party of China, told The Straits Times that President Xi Jinping has stressed over the past years that there should be "comprehensive jurisdiction" over Hong Kong.

Until a decade ago, Beijing would not interfere in Hong Kong's economy, but things are no longer the same, he said.

The clearest sign that Beijing wants the housing problems to be fixed came in late July when the top Beijing official on Hong Kong affairs Xia Baolong made the point that he hopes the city would no longer have caged homes and subdivided houses by 2049.

Days later, Nan Fung Development became the first developer to apply under the land sharing scheme to provide public housing. In recent weeks, Sun Hung Kai, Henderson Land and Wheelock also joined the programme, while New World and Henderson Land donated rural land as reserves for social housing.

"The implicit message (from Beijing) is that these big Hong Kong developers including Henderson and (magnates like) Li Ka Shing should give more opportunities to state-owned enterprises to bid for land so that the prices would somehow be limited," said Dr Lam.

In such a scenario, the limits of this policy would also be exposed, as "a good chunk of (government) revenue comes from sale of land", he added. "So this is a difficult question for whoever is the next chief executive."

Another likely result of interference by Beijing is that the Hong Kong property market will gradually be dominated by mainland players, not unlike how local conglomerates displaced British companies in the past, Dr Lam noted.

Hong Kong property firms have come under heavy selling pressure on the bourse, with investors thinking Beijing's common prosperity drive could target these big boys.

But some like Associate Professor Alfred Wu of the Lee Kuan Yew School of Public Policy believe the importance of land financing to Beijing could mean it would tread lightly.

"They will definitely step in to maintain regime stability but I don't think the interference will be sustained," he said.