Jake's View

Flats for a million apiece: why did the bureaucrats reject it?

PUBLISHED : Sunday, 07 July, 2013, 12:00am
UPDATED : Sunday, 07 July, 2013, 1:39am

The government has turned down property tycoon Lee Shau-kee's offer to donate land for homes and urged landowners with similar plans to work with non-profit organisations such as the Housing Society instead.

South China Morning Post
July 4

I may be wrong about this but nowhere in all the reports of this rejection have I seen any sign of the government offering a word of thanks to Mr Lee for his public spirit in offering to build 10,000 flats for young people at only HK$1 million each.

You would think he was due at least a thank you. For a long time now we have heard legislators bemoan the impossible entry cost to young people of owning a home while bureaucrats wring their hands and do no more than hint that it is the fault of speculators and developers.

Then along comes a prime example of the nefarious developer with an offer to build flats for young people at prices representing construction costs alone, at no profit to himself, if only the government would do its part by waiving land premiums. And what do our bureaucrats say?

They say no. They don't even say thank you to Mr Lee for his offer. They just say no and then a day later offer a regurgitation of an earlier scheme to build several towns of misery that will be filled by social security recipients alone, as the locations are too remote to attract anyone who has the choice. Not another mention is made of flats for HK$1 million each.

Thus it comes down to a scurrilous journalist to offer that well deserved thank you to Mr Lee and I do it not only for his demonstration of public spirit but for the fact that he showed up all the bureaucrats' lamentations on housing prices as just so many crocodile tears.

I don't believe they ever seriously considered Mr Lee's offer. I think the reason they took over a month to respond was purely to construct the illusion of taking it seriously and to give themselves plenty of time to dream up excuses.

Take that one about how they had to eliminate consideration of one large plot because part of it had already been designated for a petrol station. We are talking of an offering of 10,000 flats at prices not seen since near the bottom of the property market 10 years ago. Was a tentative designation on a planning map enough to refuse it?

Surely there must be some way around this slight difficulty as there must also be around the objection that it is discriminatory to make these flats available to young people only. For all his occasional gaffes, Mr Lee is a reasonable man. Surely someone could have talked to him and worked out a legally acceptable scheme.

Similarly, I cannot see that the government would have lost much by agreeing to waive the lease conversion premiums. We are running a fiscal surplus of HK$80 billion a year at the moment and we have free fiscal reserves of about HK$1.6 trillion. We have plenty of money.

Yes, waiving premium could conceivably cost the public purse tens of billions of dollars if other developers were to line up to follow Mr Lee's example, as there were indications they would do.

But for a cause that the government loudly professes to espouse, with ample money available to support that cause, this could have been a winner. Flats for a million apiece, why did the bureaucrats reject it rather than look for ways to make it work?

I think it was for that most compelling of all reasons, to wit that this scheme threatened the bureaucrats themselves. To agree to it would have been to undermine their cherished administrative procedures and their position in society. If developers can give us flats at HK$1 million apiece why look to government for them?

It is my experience from decades in the investment business that developers will always overbuild massively if given the opportunity. There are two bottlenecks, however, to this potential flood of housing. They are land and building permission, both of which are under control of government and jealously hoarded.

My thanks, thus, to Mr Lee for the demonstration he has given us that government utterances are once again just so much sanctimonious prattle.