Beware the big impending Hong Kong property bust
Michael Chugani says this is last chance for Leung Chun-ying to make an impact on overheated property market and leave at least one legacy
Boom! What’s that? It’s the sound of our property bubble bursting. Smart people can already hear the rumbling of the impending explosion. Dumb people prefer to shut their ears. That makes them dumb and deaf. These are the people who form frenzied lines, like they did last week, to grab homes at exorbitant prices.
So many thousands scrambled for a few hundred flats last week the developers made them draw lots. Yes, buying a home has become a lottery. Imagine, picking numbers to line the pockets of developers by paying over HK$5 million for flats barely 300 sq ft. Nut jobs, as US President Donald Trump would say.
Developers are duping buyers by talking up the market and circumventing government cooling measures. But beware, a crash is coming. It’s just a question of when. Our property market is now largely a casino for investors and mainland developers either fleeing overpriced land at home or wanting to get their money out.
When the crash comes, today’s crazed buyers will sink into negative equity, paying far higher mortgages than their homes are worth. Let them drown. They’ve had plenty of warnings already from officials like Financial Secretary Paul Chan Mo-po.
The last time a tsunami swept away the overheated market during the Asian financial crisis combined with the Sars outbreak, the government bailed out home owners by bowing to property tycoons. It froze land sales and home ownership flats to drive up the market.
This bowing to tycoons put us where we are now. Listen up, incoming chief executive Carrie Lam Cheng Yuet-ngor – no kowtowing or halting land sales this time when the market crashes.
Chief Executive Leung Chun-ying tried hard to undo the damage caused by years of frozen land sales when he took office. He flooded the market with land despite roadblocks from political foes, environmentalists and developers.
But politics judges leaders by success or failure. Trying doesn’t count. Leung failed after trying for five years to provide affordable housing. His cooling measures all fizzled. The success formula is to pummel hard in quick succession. Cooling measures in dribs and drabs only encourage the nut jobs and draw sneers from developers.
Leung has one more month in office. Dare he hit hard with a fistful of measures all coming at the same time? Curing the madness that afflicts our property market will leave him with at least one legacy.