Housing chief pins hope on market recovery
But Michael Suen's upbeat assessment may not convince observers concerned over Hong Kong's high vacancy rate
Part way through his speech on the state of the property market yesterday, Secretary for Housing, Planning and Lands Michael Suen Ming-yeung threw out some quotable quotes for the crowd to digest.
'There are lies, damned lies and statistics,' he intoned, paraphrasing American novelist Mark Twain. A few moments later, he reminded the crowd that 'statistics are no substitute for judgment', a declaration originally made by American statesman Henry Clay.
If that is the case, then what are homeowners, potential buyers and investors to make of the rest of his speech? Mr Suen used previously published figures to show his audience at the Lions Club that the supply of housing will diminish in the coming few years and that the property market will soon rebound.
The latest numbers show there are 74,000 empty flats out of a total of about 1.1 million in the city. But, as there will always be people moving between homes, the vacancy rate can never fall to less than 4 to 5 per cent at any given time.
Mr Suen urged his audience not to worry, because according to records for the past 20 years, this so-called 'frictional' vacancy rate is about 4.9 per cent, or 54,000 flats. This means only 20,000 apartments are actually empty, he said.
But Mr Suen failed to distinguish between the 'frictionally' vacant flats and those that are really empty. By any measure, there are still 74,000 empty flats in Hong Kong, and they are symptomatic of the larger problems afflicting the land system.
Hong Kong property prices have fallen by two-thirds since the peak of the market in 1997-98, and people are not eager to buy any more because of the perceived instability of the market.
'People just aren't reinvesting domestically; they're investing internationally,' said Stephen Brown, head of research at Kim Eng Securities. Developers and the leasehold land supply system contribute to the problem, he added.
'We have a two-tier system of development control here which does not work. Supply does not react naturally to pricing.'
Mr Brown and Adrian Ngan Wai-hung, a property analyst at BNP Paribas Peregrine, said there was nothing new in the statistics used by Mr Suen yesterday.
And do not forget the other side of the supply-and-demand equation, Mr Ngan said: 'Demand is less under government control. The only thing [government] can do is boost the economy and reinvigorate confidence.'
He said there are many factors the government cannot control that have a direct effect on Hong Kong. The government can control supply and has intervened often in the property market, Mr Suen said yesterday. More measures are likely to be announced in October to pump up the market, he hinted.
But will that be of any more help than the government's nine-point package last year, which included the halting of all land sales? Experience shows that government intervention is rarely timely or successful.
Government intervention usually comes just at the point when the market is tightening up by itself, said Mr Brown. He suggests the best thing the government could do 'would be to walk out of it [the market] and give everyone freehold title'.