Sale of hotel rooms shows the limits of government intervention
Alice Wu says that, in the outrage over the sale of Apex Horizon hotel rooms, there's a lesson about the limits of government intervention
We need to examine just why Cheung Kong's recent selling of rooms in its hotel, Apex Horizon, caused so much stir. Is it about loopholes? Yes and no. Yes, because any hotels approved by the government after 2003 must be resold as a whole. So, all can appreciate the sentiment that Cheung Kong has somehow taken advantage of this "loophole". Yet, it isn't a loophole, in that the developer did nothing it was not legally entitled to do.
It comes down to supply and demand. The hefty 15 per cent stamp duty imposed on non-local buyers, which was put in place last year to curb speculation, has discouraged a number of buyers. But no government can outlaw intentions.
Governments can, as this one did, intervene in the market by putting up harsh "conditions" to dampen incentive. But the demand remains. The people who have their hearts set on buying and reselling for profit are still there. Apex Horizon was just an opportunity that became attractive in the wake of the special stamp duty. In a sense, the hotel rooms are a by-product of the stamp duty and our inadequate pre-2003 land policy.
Loopholes are as common as potholes. In this case, the conditions were set unintentionally by our policymakers, and the business-minded among us turned it into an opportunity for those shut out by the stamp duty. The sellers and buyers were just doing what they are, at least according to Adam Smith, supposed to do - pursuing their own interests. And the government regulates, where it can.
We need to clear our heads on what the government can and cannot do. The need for government intervention in the case of market failure, whether for efficiency or equality, has never been so apparent. But, government intervention almost always comes at a price. We wanted our government to step in to curb residential property speculation, and it gave us the stamp duty. But that duty makes selling Apex Horizon rooms lucrative. Our latest "outrage" is a by-product of government intervention.
The government must learn to be smarter when it comes to policymaking. Otherwise, it's just inviting shrewd businesspeople to milk policy blind spots.
At this point, the government can do only two things. One, it must inform the public of the risks of Apex Horizon-type investments, which it has done. As for the unintended consequence of an otherwise well-intended policy intervention, it should heavily tax the sale of hotel units that were approved before the 2003 rule. If business people are going to make money from a by-product of government policy, then the government should get a share of the profits, for fairness sake, to redistribute it back into the public sphere.
It's very much like the online game Candy Crush Saga. The government steps in to intervene, causing something else to pop up. Apex Horizon is the chocolate bar at level 50: measures intended to drive speculators and investors away from the residential market have pushed them off to car parks, retail and office spaces, and have created a new market in these hotel rooms.
Alice Wu is a political consultant and a former associate director of the Asia Pacific Media Network at UCLA