Few things are more absurd than government comments on the property market. Most of the time, officials claim they do not interfere with it, that prices find their own level. But when prices spike, Chief Executive Donald Tsang Yam-kuen first suggests that measures will be forthcoming to prevent a new bubble, then subsequently promises that the measures will not depress home prices. Meanwhile, the Monetary Authority takes its own measures to cool the upper end of the market by capping loans.
The reality is that the government has always been the main influence on property prices, primarily via its land sales and land-use policies and, to a minor degree, through its ability to influence mortgage credit. That has long been the case but, in recent years, the control has become even tighter with the government not merely determining the rate of supply of new land but manipulating the price through its application list system. The latter is a disgrace - untransparent and an invitation to corruption.
Housing production is an at all-time low as a result of government policy. This not only sustains high prices in the urban area but is a huge barrier to further expansion of home ownership even at a time when interest rates are at abnormally low levels.
Government policy is also strengthening the already tight grip of the clutch of tycoons who back Tsang in return for a say in policy. They are the ones who control much agricultural land and can time their applications for conversion to residential use. They are also the only ones big enough for the mega projects of the government entities involved in flat production - the MTR Corporation and Urban Renewal Authority.
The system is exacerbating Hong Kong's already massive income distribution problems and creating a vast class of rentiers who can live an easy life on the income from one or two properties bought 20 years ago.
A secondary impact of government policy has been to favour the better-off homeowners. The differential in prices per square foot between the upper middle of the market - say, HK$12,000 per sq ft - and the bottom, at around HK$2,750, does not just reflect location. Everywhere, the bigger the flat the higher the per-square-foot price. Much of this is simply due to income levels, over which the government has no control.