Hong Kong is sometimes billed as having the world's freest economy. Whether that is true in general or not, it is certainly not the case in one key sector: property. Far from being an example of unfettered capitalism, the property market, as one of the pillars of our economy, is heavily influenced by the government through its control of land supply. And thanks largely to its policies, a key part of the market - new flats - is dominated by a few players.
All this has been well understood for some time, but little has been done about it. And so the top developers have, in fact, become even more dominant.
As several studies show, the top four firms have sharply increased their share of the market from just seven years ago. This year, two companies - Sun Hung Kai Properties and Cheung Kong (Holdings) - control more than 70 per cent of new residential properties put up for sale, or a combined 12,000 new flats out of a total of 16,624. And because of tight land supply, most analysts believe the situation will continue for some years. That is double their share in 2003 - an impressive rise.
Part of the credit - or blame - for this rests on the de facto high land value policy - long pursued but rarely acknowledged by the colonial administration - which is being continued in the way the government currently carries out land auctions. These usually involve large and expensive sites that only the largest developers can afford to buy.
One consequence of this is that small and medium-sized developers are priced out of the market. The periodic land sales have become a key source of government revenue and the basis for a low tax system.
But selling land at high prices is a double-edged sword. True, it keeps our taxes low, but it also means developers need to sell higher to recoup their costs. And those prices cascade through the rest of the economy.
