The Consumer Council released its study on the competitiveness of the private residential property market last Thursday and concluded that it is not competitive and not contestable. According to the report, this is mainly due to the market's uniqueness.
The council found no collusion among developers and also recognised the risks involved. The problem lay with the market's structure, but the council believed drastic government action like the breaking up of 'monopolies' in the United States was not needed. The report proposes improving competitiveness. One change would be to lower barriers to entry of high land cost by dividing land for auction into smaller lots.
This should be considered in light of the trade-off between the number of players in the market and the fewer flats that can be developed. This would lead to higher prices which goes against the aim of increasing competition to lower prices. Another idea would be to nurture new entrants and small developers. Increasing new entrants into the residential development process is a natural facet of a free market.
However, in a free market no players should get favoured treatment. The success and failure of investors should be left to a free market which is competitive and free of entry barriers. Another area is to increase the residential land supply through better planning of new land formation and redevelopment of old land. The report also suggests re-zoning obsolete industrial areas for residential purposes.
The Real Estate Developers Association has long suggested private participation in land formation or infrastructural improvements to speed up land for housing as well as requesting greater co-ordination of the development controls to residential development.
In reviewing the maximum permissible plot ratio, it is worth noting that the plot ratio control, because of height restrictions in Kowloon due to Kai Tak airport, has been further lowered despite the relocation of the airport to Chek Lap Kok. The report also proposes a greater balance in housing supply and demand by supporting the private sector's role as facilitators in converting land into homes.