The post-1997 property bust has been so painful and has lasted so long that the government has felt compelled to introduce one measure after another to prop up the market. In 2000, it ditched the long-standing practice of putting a predetermined number of sites on the market every year.
Instead, the so-called application list system was launched, whereby a small number of sites would be put up for sale and other sites on a reserved list would be auctioned only if developers expressed an interest in buying them. When even such a system was unable to avert further declines in values, the drastic step was taken last November to suspend land sales altogether.
It was the ultimate move by the government, as Hong Kong's largest land owner, to manipulate the market. Yet the momentous decision to suspend land sales, along with other measures to restrict housing supply - such as scrapping the Home Ownership Scheme, under which flats were built for subsidised sale, and suspending the scheme that allowed public housing tenants to buy the flats they rented - were unable to spark a recovery. By mid-year, housing prices were estimated to have dropped a further 10 per cent from last November's levels. And compared with 1997, prices had plunged by almost 70 per cent.
Now that the market has shown the first signs of a turnaround - aided by a number of measures introduced by the central government to help Hong Kong - the government has sent a clear signal that land sales will be resumed.
It is a step we support, but not just because the developers say they are now prepared to buy land again. The suspension was a radical measure that was slated to last one year; there are simply no reasons for it to persist any longer.
The resumption of land sales would be greeted with great anticipation, as the auction results would be valuable indicators of market trends. Already, developers have begun their lobbying efforts to shape the land sales programme. Some have suggested that only sites for luxury developments should be put on the list. They are concerned that releasing more sites for mass residential developments would depress market sentiment as 50,000 new flats, mostly small and medium-sized ones, will be on the market between now and the end of next year.
