WHARF CHAIRMAN PETER Woo Kwong-ching has proposed two benchmarks for property prices, one for what they should be and the other for how they should change. They are simple and straightforward and they utterly ignore the fact that property prices are set by a market. The first in an opinion piece we published on Friday - 'It is time to address the city's big problem' - is that home prices should be at 1991 levels, which is about where they are now. The second is that prices should rise at a rate comparable to the growth of our economy. But why should 1991 be a benchmark for prices? Good question. Mr Woo gave no reason for it. He simply said prices had come down to 1991 levels and then made the jump to an assertion - '... if we believe that 1991 prices would, at this time, be a reasonable level to form a base, we must establish a clear policy and demonstrate an unyielding determination to consolidate that base'. We turn to you for this unyielding determination, sir. You are a property developer (sometimes). If you have some flats to release, then let us see you price them at 1991 levels and, if there are no takers, show some of that determination not to let the market dictate your prices. They are your flats. You can charge what prices you will for them. Be unyielding. Prove to us that you have this steely resolve. We rely on you not to let the market push you around. And as to the rate at which property prices should be allowed to rise, I refer you to the first chart. The red line shows the government's residential property price index for as far back as I can find the figures and the blue line, set to the same index base, represents the size of our nominal gross domestic product over the same period. If a policy of linking residential prices to the growth of GDP had been adopted in 1981, with that same unyielding determination naturally, the cost of an average flat would now still be 22 per cent higher than it was at the peak in 1997. As a homeowner, this would please me enormously, sir, although I think it is not quite what you had in mind. But obviously, we do not need to take 1981 as a base of comparison with GDP growth. We can adopt your 1991 instead. In this case, the current price of a flat would not be at 1991 levels but about double that figure. Go ahead and try that sort of price on the market, sir, and remind me not to buy any Wharf shares if you do. Then again, of course, you may mean that prices in the future should rise by no more than the GDP. If so, I can only ask you why in the future but not in the past and why GDP rather than per capita disposable income or the number of notified cases of whooping cough for that matter. You did not explain why. If, for instance, the determining factor really is to be GDP growth then you will not find me buying property. With GDP further down, I would not want to be in the market in the first place and, with GDP growth recovering, there would be plenty of investments to give me a greater immediate return than property prices that only go up by the rate of GDP growth. Guarantee this performance of property prices through your unyielding policy resolve, Mr Woo, and you will find few buyers of property. Others will make their investment calculations exactly as I just have. The property market is a market, sir. It sets its own prices relative to prevailing supply and demand. Both of these forces are determined by a host of other factors that no makers of policy directives have a hope of fathoming accurately. Interfere with it through policy benchmarks, however intellectually appealing these may be, and you can only make up and down cycles worse. If you want to do anything at all through government then, restrict yourself to making supply available on a consistent basis. You may wish to note from the second chart that this is what government, with all its recent talk of price intervention, has not done. We are back to a very low level of fewer than 7,000 construction starts on new homes per year in the private sector while the government has abandoned its public housing for sale programme. If you really insist that we should cut back further on property supply in this environment then, you set the stage for another property bubble in the future. Please yield to the market, sir. Your ideas for improving the market actually defy the market and things will definitely be the worse for us if we adopt them.