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25/05/2011

Desperate situation in property market

LAST THURSDAY at question time in the legislative chamber a legislator suggested that the government impose restrictions on mainlanders' property purchases here. Donald Tsang said it would not consider doing so unless things were desperate. When may the situation in theproperty market be described as desperate? Donald Tsang gave no explanation then, and nobody knows what he meant.

In our view, the Tsang administration has misread the property market and, as a result, Hong Kong as a whole is in passivity.

First, the government has made a serious mistake in relation to land supply. It is due to a supply-demand imbalance that property prices have kept shooting up over the past few years. The crux of the matter is the application list system. The government has just left it to developers to control land supply. In the twenty-one months between early 2008 and late 2009 no land auctions were triggered. However, to remove doubts, the government would assert the application list system has proved effective. However, that system is what lies at the root of the problem. It is thanks to it that new residential flats have been in extremely short supply over the past few years.

The government just hopes the property market will correct itself when interest rates go up. It isdesperate to avoid being accused of causing property prices to crash.

Last Thursday at question time Donald Tsang again sang the same tune. Yesterday, Norman Chan said interest rate risk was higher now than in 1997. When it mentions interest rate risk, the government intends to talk property prices down. However, it is a fact that they have gone up and up despite such talk over the past three years. In pinning its hopes on interest rate increases in the US (beyond its control) instead of effecting changes in the property market by increasing land supply (within its control), it has made a mistake of principle in the first place. Is it true that Hong Kong's property market will develop healthily if interest rates go up in the US? Last Friday Cheung Kong Holdings chairman Li Ka-shing predicted this year the Fed would keep interest rates unchanged or would raise them by 0.25% or 0.5% at most. Evidently, Tsang et al must wait some time before they will see what they hope for.

Lest the Chief Executive should again get away by pretending to do something about theproperty market, we demand that he come up with a long-term housing plan next October when he delivers his policy address. We do not think he is likely to do so. Nevertheless, even if he fails to do so, he should clearly tell the public (1) how the government looks at mainlanders' property purchases here and (2) what he means by a desperate situation in the property marketand, if he insists that no restrictions should be put on mainlanders' property purchases here, why he does so.

Most economists, market analysts and real estate agents regard mainlanders as new blood inHong Kong's property market and believe they play an increasingly important role.

More and more people think the government should take measures to stop mainlanders from buying properties here so that local citizens can afford their own homes. Restrictions on foreigners' property purchases designed to prevent speculation from pushing property prices up have been implemented in such countries as Australia, Singapore and Malaysia. We gather similar measures will be launched in some Canadian cities. They are aimed at curbing property speculation lest locals should be unable to afford housing. Donald Tsang has said it may violate international covenants to do so. He has also mentioned a desperate situation in the property market. We demand that he clearly and definitely explain such ideas when he delivers his next policy address at the latest.

 

SOURCE: SCMP



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