Since 1997, property prices in Hong Kong have fallen by more than 50 per cent. Many people have lost their savings and now find themselves in debt. According to the economic law of demand and supply, the drop in flat prices either resulted from a decrease in demand, or an increase in supply. Following the Asian financial turmoil in 1998, average incomes fell and tenants who rent now cannot afford to buy flats. Also, government policies aimed at curbing property speculation have discouraged people from buying flats as an investment tool. The plan of the Government to build 85,000 public and private units per annum was a mistake, because officials failed to notice that the purchasing power of the general public had become very weak. The property market has also been adversely affected by high interest rates caused by the pegged exchange rate. Banks are concerned that an increasing number of borrowers will default on their loan repayments. The supply of residential flats has not decreased, because the Housing Authority and the Housing Society has continued to build a lot of Home Ownership Scheme (HOS) flats. Also, many Hong Kong people instead of buying here have chosen to purchase property in the mainland, where the price of a flat is one-tenth of that in the SAR. As well as suspending the sale of HOS flats, the Government should also use its reserves to purchase vacant units from private developers. I hope that, eventually, property prices will become as stable as food prices. CHRIS TSANG Hunghom
