Target Hong Kong housing woes with a 'shock and awe' strategy
Mike Rowse says the government missed an opportunity in the budget to show some vision
It seems churlish for someone like me to complain about this year's budget. After all, I - and I suspect most readers - directly benefit in ways large and small. Property owner? Tick, that's two quarters of rates that won't be charged. Pay salaries tax? Another tick and that's HK$20,000 more coming into my hot, sweaty palms. Operate a small company and pay profits tax? Yet another tick and still more money coming back. Plus, of course, a whole bunch of freebies for the less well-off in terms of extra social security benefits and rent for public units squashed for a month. What's not to love?
My quarrel is not with what is in the budget but what is not. What former US president George H. W. Bush called the "vision thing". What the community has been crying out for is a dramatic effort to break the psychology accepted by both property developers and potential buyers that prices are on an inexorable upward trend that will never end.
Why are some developers keeping flats off the market, as some undoubtedly are? Simple: with interest rates so low, the capital cost of carrying the flats is much less than the increase in price that can now be charged.
Why are buyers rushing to buy ludicrously small apartments at ridiculously high prices? Because they can see that prices are still on the increase. The situation won't last, of course, but nibbling at the edges with a site here and a plot there will take too long for the braking effect to take hold.
We can look to two American policymakers to teach us what to do, though they were acting in completely different contexts. Ben Bernanke saw that the first Japanese attempt to reflate its economy in the early 1990s failed because the amount of money involved was too small. He went to the other extreme and created US$3 trillion of new money and the US economy is now growing robustly again. President George W. Bush made many disastrous mistakes, especially in foreign policy, but at least he got one thing right: when invading Iraq, he authorised a campaign that would create a sense of "shock and awe". America's friends would know they were really committed, and their enemies would know exactly what was in store.
Hong Kong needed - needs - something similar in our housing policies. It's probably not a good idea to carpet bomb the head offices of Cheung Kong, Sun Hung Kai and Henderson - too many innocent people might get hurt as well.