The View | Hong Kong’s restrictive regulations are to blame for house prices rising steadily since 1984
A strategy must be found to lower regulatory costs, and to rid the market of what some call ‘government-developer-landlord cronyism’
Why have property prices risen steadily since 1984, punctured only by the Asian financial crisis and the ensuing recession of 1997-2003?
There are three explanations. First, demand has been driven by business cycles abroad, including Fed policy, mediated primarily through their effects on interest rates and exchange rates.
Second, China’s opening has produced two demand effects. One is the structural shift away from manufacturing into services, which inflated the prices of domestically consumed services (including residential property prices), the other is the increased demand from the inflow of immigrants through cross-border marriages and the rising wealth of mainland buyers.
Third, the slow process of land development and housing construction has reduced housing supply growth. There are two interpretations as to why that has happened.
One is the populist view that blames “government-developer-landlord cronyism”. This is a charge advanced by a growing number of opposition politicians. This explanation is unconvincing because it depends on rising cronyism and proving why it has risen over time and whether its timing coincides with rising housing prices.
