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SCMP Reporter

IT has been a year since the Government unveiled its package of measures aimed at bringing sense to Hong Kong's runaway housing market - and some developers are now saying enough's enough.

  In particular, they want the Government to ease the ban on pre-sales of unfinished flats more than nine months before completion.

  Because of bureaucracy and internal administration, which typically causes delays, developers said the ban often effectively meant they could not start marketing phases of projects until they had virtually completed building them.

  This causes problems with cash flow, and starves them of working capital to fund further phases of development.

  It also results in increased borrowing.

  S Y Wai, spokesman for the Real Estate Developers' Association of Hong Kong, said the nine-month ban on the pre-sale of flats was hurting developers.

  'Banning the pre-sale of homes makes it difficult for developers to market and sell their flats,' he said.

  'With only nine months of pre-sale, they don't have the proper time to market their product.'   According to Mr Wai and some estate agents, the Government should allow developers to begin pre-selling as many as 15 to 19 months before actual completion.

  Developers said that previously they could begin to market a development once they had completed one third of the project, helping to maintain cash flow.

  Now, however, developers had to wait until the 25th month of a three-year project before they could offer flats for sale. 'This is very undesirable,' said Mr Wai. 'What this has done is push back the supply of future housing.'   There was common agreement among property analysts and members of the real estate industry that the Government has succeeded in knocking the wind out of the sails of property speculators and hoarders, who drove property prices up to intolerable levels last year.

  But at what cost?   A year on, with property prices having already dropped in some districts by as much as 30 per cent, there is a growing fear that these 'short-term' measures announced by the Government last year could stay for good.

  Most would agree the measures have scared many speculators out of the property market.

  But some of the same voices would also argue they have damaged the long-term health of the domestic property market.

  In fact, there is a strong body of opinion which says the Government should never have become involved in the first place, and the faster it gets out of trying to regulate the property market the better.

  The Government was forced to abandon its characteristic laissez-faire stance more than a year ago, when a media frenzy about escalating residential property prices forced authorities to take action. In June 1994, the Government unveiled a package of measures aimed at deterring speculators and increasing the supply of land, in order to provide between 45,000 and 60,000 new flats over the next five to six years.

  In the short term, the Government said, it would attempt to curb property speculation by limiting the numbers of flats that developers could sell internally to their employees.

  By reducing that percentage from 50 to 10 per cent, the Government claimed this would free up 10,000 private domestic flats to home buyers each year.

  It also banned developers from pre-selling their unfinished flats until nine months before completion, and flat owners were banned from selling their uncompleted flats.

  To most analysts it was the Government's move to ban the pre-sale of flats until nine months before completion that was the straw which broke the speculators' back.

  'Basically, the key issue was the banning of the pre-sale, ' one analyst said.

  'This way the developer had little choice but to sell completed flats.'   According to this and numerous other property analysts, end-users are now the ones who are lining up to purchase their new homes.

  'Look at Kingswood Villas,' said one analyst. 'Look at La Costa at Discovery Bay. The demand there was real market sentiment. The speculators have been removed.'   Sales of apartments in both projects were recently heavily oversubscribed, with the vast majority of those registering thought to be end-users.

  Another analyst said: 'The system now ensures that developers end up selling completed flats.'   From the outset, Hong Kong was divided into two camps about the Government's moves - and not surprisingly they are still divided today.

  Some have always maintained that the Government should have gone farther than it did to provide Hong Kong people with much needed affordable housing.

  There were others who said the Government was interfering in an area in which it had no business being involved.

  But now the Hong Kong economy is in a slump and so is the real estate market.

  Home prices have dropped by as much as 30 per cent, with some property experts predicting that the market had yet to bottom out.

  With the property market in the doldrums, many developers and estate agents said that it was now time for the Government to remove or at least ease the controls.

  Michael Choi Ngan-min, president of the Society of Hong Kong Real Estate Agents, said the Government should withdraw the regulations because they interfered 'with the natural development of the market'.

  He said continued enforcement of the regulations could deter developers from undertaking necessary housing projects.

  But Mr Choi cautioned that easing the regulations would not have an immediate impact on demand.

  'People's wealth has been affected,' he said.

  'When it shrinks then their consumption ability is affected.' 



Developers chafe at restrictions