Grounds for cooling the heat over property prices
Why do people line up to buy exorbitantly priced flats? It's not that they don't already have a roof over their heads, because they do. They want to live at a higher standard, of course, but in that case they can always rent a better flat. Why do people want to buy an apartment, then?
Chinese people everywhere seem by nature to want to own their living quarters. Renting a flat is living in another person's house. Without a home of our own we don't feel settled. This is because, throughout the ages, experience has taught us that land and property are good investments. It still seems to hold true most of the time.
Problems arise only when investing turns into speculation. This happens when housing prices escalate rapidly and persistently, creating the impression and expectation that prices will rise forever.
People are then compelled to buy as soon as possible, irrespective of the price, for fear of losing out. Some find it more profitable to just get into the business of buying and selling - becoming speculators. This further fuels the upward price spiral, and the bubble thus gets bigger and bigger until it finally bursts.
In Hong Kong, the government has tightly restricted the supply of land for over a decade, ever since the bursting of the property bubble in 1998. As a result, there has been a shortage of new flats on the market for a long time. This state of affairs will continue for at least the next three years no matter what the government does now. That's the length of the real estate gestation cycle, from the drawing board to moving in.
The acute supply shortage of the coming years is widely known, and this can only lead to more speculative activity in the property market. Add to this the fact that mortgages are available at very low interest rates, and hot money is coming in - especially from the mainland, where it is now fashionable to invest over HK$6.5 million in a flat in Hong Kong and get SAR passports for the whole family, with all the welfare benefits thrown in as a bonus. In short, this is a property speculator's paradise.
The government knows it cannot change the market situation, and is trying to defuse rising anger - especially among the younger generation who do not own an apartment. So now it is trying to redefine the problem as property developers cheating, and is portraying itself as acting to stamp out the malpractice.
Various forms of misrepresentation and cheating are commonplace in property marketing, and the government's conniving attitude is deplorable. This has to change, but substantial change cannot occur just by issuing non-binding guidelines; instead, incisive legislation is needed.
The government is obviously not willing to confront property tycoons. Its too-little, too-late, half-hearted window-dressing act will not please the public. It only confirms the prevailing general suspicion of collusion between the government and property interests. This adds insult to injury, with the result: more anger, not less.
Mind you, frantically pushing a lot of land onto the market - which the government, under pressure, is likely to do - is not the right move, either. It would result in a sudden flooding of the market in three to five years and abrupt price falls, which would make everybody unhappy and lead to even wider price fluctuations.
The correct policy is to send a clear, strong signal of a regular land supply - to create a rational expectation of a steady housing market and prices. The government should resume regular land auctions - now.
Lau Nai-keung is a member of the Basic Law Committee of the NPC Standing Committee and a member of the Commission on Strategic Development
