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  • Dec 19, 2014
  • Updated: 10:48pm
Jake's View
PUBLISHED : Sunday, 30 September, 2012, 12:00am
UPDATED : Sunday, 30 September, 2012, 4:32am

Bad idea to survey mainlanders on why they buy Hong Kong property

"Times have changed. We cannot ignore their [mainland buyers] demand and have to consider how to accommodate their needs - provided they are genuine needs. We have to do a survey to find out how many of them buy a home for self-use, how many for long-term investment and for speculation."

Marco Wu Moon-hoi
Long-Term Housing Strategy Steering Committee
SCMP, September 24

I like that bit about genuine needs. The only mainland property buyers whose genuine needs could possibly concern us, Mr Wu, are those who have moved here and are looking to buy their homes, in which case we call them Hong Kong residents.

This is only a small minority of them. Most have come here because they want to invest their money in a place that is reasonably safe and, in many cases, to hide their money from the authorities in Beijing.

But whether or not they have nobler objectives than just looking to make a turn on their money, we are under no obligation to accommodate them. Let the national government deal with their genuine needs. These people are no more our responsibility than if they lived in southern Chile.

In fact we have already gone out of our way needlessly to accommodate them. The misconceived Capital Entrant Migrant Scheme, which has done nothing for us but put unnecessary strain on our economy, was changed in October 2010 to exclude property from the list of qualifying investments.

They still allowed everyone on the application list at the time to put their money in property, however. The result, as the chart shows, is that instead of slowing down, property investment through the scheme accelerated and more than doubled to HK$41.5 billion.

It's a great traffic cop we have here. With one hand he signals a line of mainland traffic to stop and with the other hand he beckons it on. Real joined up government we have.

But where I think Mr Wu crucially shows that he is entirely at sea in these matters is in assuming that he can conduct an accurate survey of investment intentions.

Put yourself in the position of a survey respondent who has just been bothered for the fourth time with a nuisance call on his mobile phone. His inclination is to sandwich the message "Get Lost" between expletives and then thumb the red button.

Even assuming the survey is face to face, the first thing any mainland buyer will ask himself is why he should tell the truth when he already knows from every media outlet in town that the objective of this survey is to provide reasons for excluding mainland buyers.

This assumes that he has thought his objectives through in the detail that the survey takes for granted. He hasn't. His objective is to make money.

Thus if you ask him whether he is in it for the long term or for speculation he will tell you that it all depends on the property market and on what else he thinks he can do with his money at the time. It is the most truthful answer you are likely to get. It is also the best one for anyone's investment purposes.

If he thinks about it he may ask you what distinguishes a long-term investment from speculation if the objective in both cases is to sell at a profit. Three months? Six years? What's the answer, Mr Wu?

The answer, of course, is that Mr Wu's Long-Term Housing Strategy Steering Committee is as short on insight as it is long on name.



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Good reaction Jake.
This survey is like the one when you are asked to enter in some country : "will you attempt to hurt the country or trigger a bomb?"
Better let people who wants to live and make HK growth provide reasons instead of people who just want profits and putting a strain to the local infrastructure.
The issues of money flowing into the HK economy on the one side, and what that money is invested in, on the other, are separate. Somehow excluding property as an investment target for foreign capital would be aiming to distort away what is a classic bubble, caused by loose money. In other words, let's have artificially rising property values, but only for residents. (Which in turn would simply switch mainland attention to lending to residents, or set up companies to invest in property, and the bubble continues).
The real culprit is a super loose monetary policy designed to ward of deflation (in the US), applied via a fixed exchange rate to the more boyant HK economy, continuing to fuel inflation and a bubble that has pretty much burst everywhere else.
Negative real interest rates mean loans are cheap, and savings deposits are pointless. A fixed and undervalued exchange rate with the mainland means the HK$ does not appreciate in response to capital inflows, so property and inflation has to increase instead.
To fix the problem, don't tinker with investment categories, look at the big picture.
The fixed exchange rate is certainly a problem, but that doesn't mean government policy is helpless to counteract surging property prices. Look at other economies such as Singapore and Taiwan which have seen milder (though still considerable) rises in property prices despite ultra-low rates.
Another totally clueless govt official. The reason anyone buys property is the fact it has been a good long term investment. "Long term" is relative to the buyer's expectations: 6 months? As a legacy to one's offspring? Does it matter?
The main issue here as well as with most of govt's hare-brained ideas is the people pulling the levers of power do not understand the role of government in a relatively free society.
Hong Kong...................before......and now............


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