Property market in 'dangerous situation', warns Lam Woon-kwong

A "knee-jerk" approach to building more housing and creating a land reserve may permanently damage the efforts of town planners, Executive Council convenor Lam Woon-kwong cautions.

In an interview with the South China Morning Post, Lam also warned that speculative buying had put the property market in a "very dangerous" situation, and the government must watch for the downside while trying to alleviate the land shortage.

In his policy address last month, Chief Executive Leung Chun-ying said the government would rezone 36 government, institution and community sites to relieve the acute demand for housing.

Without referring specifically to Leung's speech, Lam cautioned that "some knee-jerk reactions could in due course do permanent damage".

He cited Tseung Kwan O as an example, noting that the town was originally planned to have a pleasant living environment.

Instead, the plot ratio was raised under former chief executive Tung Chee-hwa's policy of building 85,000 flats a year. Tseung Kwan O developed into a forest of high-rises that block the sunlight and darken the streets.

"I am old enough to say, we have made a lot of mistakes in our town planning and housing construction; most were because of knee-jerk reactions," Lam said.

He stressed the necessity of the government creating a land bank, or land reserve. It was "lamentable" that the biggest land bank was not owned by the government, but was in the hands of property tycoons, he said.

"Building up a land reserve is not done by finding a piece of land in Causeway Bay and inserting a toothpick-like building on it," Lam said. He was referring to recent proposals to build new public housing developments so small that they would hold only a few hundred flats.

Instead, the government must take the long view, reclaim land outside Victoria Harbour and develop new towns, Lam said.

He said he broke into "a cold sweat" recently when he saw a report on global property statistics ranking Hong Kong at the top, with its 90 per cent surge in prices over the past five years.

Singapore, which came second, saw only a 24 per cent surge.

"Buyers have to think about this - what is so special in Hong Kong that could support this unreasonable surge?

"I believe it is speculation," Lam said. "When property prices increase even for small homes and peripheral areas in the New Territories, almost always in the previous decades this has signalled the end of the cycle."

While the final stage of the cycle could last for a long time, he said, the risks were obvious because interest rates could go up in the coming years.

"When [the administration] implements policies to make up for a shortage, you have to watch for the downside," Lam said.