Property affair shows need for transparency
Nothing focuses Hong Kong's attention quite like a surge in the property market. Record-breaking sales of luxury homes sparked fears of a price bubble spreading to the mass market, already up nearly 30 per cent this year. Government spokesmen from the chief executive down have been compelled to calm protests by pledging action to stabilise the market and warn developers about misleading sale practices and prices. The de facto central bank, the Hong Kong Monetary Authority, intervened to tighten bank lending for luxury properties.
In the light of all this, we could be forgiven for thinking that ordinary buyers are at the mercy of forces beyond their control. So it is good to learn that their common sense was running ahead of the curve of concern about a price bubble. Property agents' sales have slowed sharply over the past two weeks as sentiment soured. More significantly, this followed a 23 per cent fall in sales recorded last month, which better reflects activity during September because of the time lag between transactions and registrations. Agents expect the next batch of figures to show sales continuing to fall last month.
Market forces therefore anticipated fears of a bubble long before a chorus of protests over rising prices and official expressions of concern. The cautious sentiment over the past month or two indicates that the market is mature and fundamentally healthy.
That is not to say that the interventions of the chief executive and the financial secretary were untimely. Their affirmation of their readiness to use tools available to them to steady the market, and their warning to developers needed to be said. Amid an unprecedented inflow of cash into the city's financial system, much of it destined for the property market, the Monetary Authority was right to go a step further and exercise its supervisory powers over the banking system to rein in lending and urge caution. The main lesson to be drawn from the affair, however, is the importance of transparency and a free flow of market information, including for luxury property deals. Buyers have shown they can make prudent decisions when others seem to be losing their heads.