Housing market crash would only add fuel to Occupy Central campaign
Grant Chum says with a conflagration over political reform threatening to erupt, officials now have less room to move on the housing front, and the status quo may be the best hope
A year ago, I suggested in these columns that Leung Chun-ying's term as chief executive will be judged primarily on how he tackles the twin issues of housing and political reform, and that a stronger advocacy of a coherent ideology on both those issues would be critical to his success.
Since then, these two ostensibly distinct issues have become more interwoven. House prices have soared by another 18 per cent, while the birth of the Occupy Central movement for universal suffrage has aroused serious concern in Beijing and the pro-establishment camp in Hong Kong. In Leung's inaugural policy address in January, constitutional development received only the most perfunctory of mentions - just two paragraphs out of a total of 200.
The danger of not containing the controversy over Occupy Central is patently evident. Yet the key to such containment lies not simply in providing more forceful political leadership on the universal suffrage debate. Ensuring that Hong Kong people are more satisfied over livelihood issues (housing being the overarching one) will also be vital in limiting mass protest over purely political issues such as electoral reform.
On housing policy, after successive tightening measures, the relentless ascent of house prices since 2009 has finally begun to reverse. Does this represent political success? In the short term, yes: a further significant rise in home prices is undesirable as it increases the potential of an asset bubble, further widens the wealth gap and gives the sense that the government is losing control.
Yet very little in terms of a real long-term policy objective is achieved in the event of a house price correction. Even a 25 per cent decline in prices would only take us back to levels that prevailed at the end of 2010 - a time when Hong Kong households were hardly celebrating the easy affordability of housing, and which coincided with the introduction of the special stamp duty measures.
In fact, assuming interest rates normalise over the next several years, nearly 80 per cent of households (the proportion that earn less than HK$40,000 per month) would still find ownership of private housing either unaffordable or relatively expensive (at least those without the aid of inter-generational wealth transfers).