Housing source stuck in denial

PUBLISHED : Saturday, 17 June, 2000, 12:00am
UPDATED : Saturday, 17 June, 2000, 12:00am

Modesty is not always a virtue. When a government official takes a stand on an issue of the day you expect him to identify himself, not be a little baaa-Lam and ask to be named as a 'source'.

Mr Source, prompted by pleas from legislator James Tien Pei-chun this week to do something about low property prices, was quoted in this newspaper yesterday as saying that the Government has no intention of doing anything.

This is all very laudable. The less government tinkering we have in the property market, the better. But Mr Source said a few other things worth taking note of as they represent Government misperceptions of how a market works.

There is no speculation in the property market. Not so. There is always speculation in the market. In fact, one of the reasons the market thrives is the number of people willing to take bets that prices will go either up or down. Without them you would find it very difficult to buy or sell your flat when you need to.

What the Government objects to are speculators betting that prices will go up when they are already high or down when they are already low.

But don't blame the speculators for these price swings. Property prices everywhere are foremost a reflection of Government land-use policies. Look in a mirror, Mr Source.

We hope the market will be stable. There is more than government hope involved here. The market is weak at the moment principally because the Government is stuffing something like 40,000 public sale flats into it this year at discounted prices when official surveys show that few people want them. It is such a huge supply that it is leading private sector prices down and inducing private developers to slow down their own building starts.

The inevitable result will be an upward bounce in prices again at some later date.

Government intervention in the market is clearly not limited to hope.

We will monitor it closely. Thank you, sir, but everyone tries to do that and it is a mighty confusing business, with Government usually behind everyone else because it relies on the full paperwork being filed up to three months after the spot prices that developers have at their fingertips. Do tell us your secret indicator, Mr Source. If monitoring the market could really show you where it is going your correspondent would long have been a billionaire.

It is difficult to say what a reasonable price level is. Exactly. So in the future, Mr Source, let's have no more statements from your boss, Chief Executive Tung Chee-hwa, about only intervening in the market when the market gets it wrong.

You don't know. He doesn't know. In fact, no one knows. There is no such thing as an absolute benchmark of reasonable price.

It is all subject to supply and demand, with the multifarious influences that operate on these things.

If you are worried about them then get your boss to rethink the government basics in this business - land-use policies. Do that properly and prices will take care of themselves.

In the early 1980s, two property tycoons visited the then housing branch and told officials the higher the quality of subsidised flats the more difficult it would be to sell flats in the private sector.

This is, of course, a snipe at developers who have been lobbying for a halt in the sale of government-subsidised homes. It implies that they complain only because the competition from Government is so good.

If only it were. The facts, however, are that public opinion clearly regards the finish of public-sales flats as inferior to their private-sector equivalents and that we now seem to have little more than monthly intervals between new revelations of scandals in public construction.

It does no good for Mr Source to say that the Government will not intervene in the market. It has intervened directly and massively for almost a lifetime and it is doing so as you read this.