Wharf Estate Development

I HAVE A suggestion for you, Mr Wong. The next time your company releases some new flats for purchase by the public, I would like it to adopt a new system for selling those flats.

Under this system, you would fix and publish absolute minimum prices for these flats. You would then proceed by inviting bids from the public for them and by making two further binding commitments.

The first is that you will not sell the flats at all unless you are bid at least the minimum prices.

The second is that you will sell all the flats at their minimum prices if you are bid no higher.

It would put you in a bit of a bind, I know. What if you set your minimum prices too high and you get no bidders? By the rules of this system, you cannot just tweak your prices lower. You have to withdraw the project from the market if your committed minimum prices are not met. Your finance director will not be pleased.

Alternatively, what if you set those minimum prices too low? Unless demand is truly enormous, you will effectively invite potential buyers to bid only the minimum prices or a fraction above and, by the rules of this system, you will then have to sell the flats at those prices. Once again, someone will not be pleased.

But, Mr Wong, you would have no grounds for complaint either way. This is no more than what you are asking our government to do when it sells land to you under the application list system.

Would it not be better for you to establish minimum prices that you are willing to accept for your flats but keep those prices a secret? You can then invite the public to bid for the flats.

You may still decide not to accept the bids if you think they are too low, but you have not tipped your hand to the buyers. Your chances of getting a good deal more than your minimum prices are now much enhanced.

And this is essentially how the application list system works at the moment. You tell the government you would like to bid for a piece of land and if your bid is above the reserve price, which it keeps a secret, it will hold an auction for that land. If you are the only bidder, you will get it at your bid but, otherwise, you will have to chase the bids up as far as you think you can afford.

Of course, it may turn out that your original bid was well above the reserve price, that you are the only bidder and that you paid a good deal more than you had to pay. Tough luck for you and good luck for me because I am a taxpayer, and the more extra money that comes in from land sales the lower my taxes can remain.

Thus, when housing secretary Michael Suen Ming-yeung says, 'We know many developers face many difficulties [with the application list] ... we will carefully consider their opinions', my advice to him, Mr Wong, is that he should not spend too much time considering your opinion.

Sauce for the goose is sauce for the gander. You do not sell your flats the way you want the government to sell you land and I think Mr Suen should take his lead from what you do rather than what you say.

If there is anything wrong with the application list system, it is certainly not that the government keeps reserve prices for land on the list a secret.

In fact, I do not think there is much wrong with the system anyway.

The biggest complaint that developers have is that these reserve prices are too high, that they cannot afford them and that Hong Kong will therefore not have enough new developed property in coming years unless the government becomes more accommodating.

There may be elements of truth in this. There is certainly evidence that supply of new residential property over the next few years may be considerably less than demand for it. This may also be true of office property.

But I was not absolutely certain that I could carry the load of my mortgage when I first bought a flat. Any interruption of employment and that mortgage could have been at risk.

I see no reason why developers should be given greater comfort, particularly with a rising property market that is likely to reward them with handsome profits on any minimum price the government sets for land.

I think Mr Suen should indeed carefully consider whether he is looking at a supply-demand imbalance in the future, but this proposal that he publish reserve prices is one that he should ignore.