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25/05/2011

 Flat target no longer scary

The property market is always cyclical, and recent incidents suggest Hong Kong may be heading for another phase of the cycle.

I'm not sure if it'll be a blessing or a curse in disguise. However, one may refer to previous experiences for clues.

When former chief executive Tung Chee-hwa boldly announced he would provide 85,000 housing units a year following the property boom before the 1997 handover, people applauded, thinking that home ownership can become a reality rather than just a dream.

But optimism quickly turned into a nightmare after the Asian financial crisis and the IT bubble burst.

Whenever the 85,000 figure was mentioned, chills shot up spines. Even politicians who had lashed out at developers turned pale after seeing many middle-class families getting trapped in negative equity and isolated cases of suicide, as the market tumbled.

But it began to turn the corner after bottoming out during the SARS epidemic in 2003. Although many people were still in a state of negative assets, they finally saw light at the tunnel's end.

Clearly, we are now reaching another defining moment of the cycle. In recent days, there have been more talks of the 85,000 flats target, with some even praising the once-nightmarish policy. Last week, at a public forum organized by legislator Leung Yiu- chung, a local resident also praised Executive Council convenor Leung Chun-ying for being brave enough to suggest the policy.

The resident isn't alone in calling for more housing supply. Politicians are reluctant to give a specific number these days, but their calls for more and more land are simply the equivalent. In the end, the sites will be turned into flats.

If the previous cycle is any indicator, what's happening now shows we could be in a similar phase of those boom years prior to 1997.

This time, instead of Tung, his successor as chief executive, Donald Tsang Yam-kuen, is coming under mounting pressure to respond to the market boom.

Critics are blaming mainland capital for the surge, but their readiness in pointing fingers at mainlanders is alarming. As Hang Lung Properties chairman Ronnie Chan Chi-chung noted yesterday, the SAR is a free market and everyone - regardless of nationality - should be free to buy properties here. Instead, Chan said the government should keep supplying more sites for the masses rather than the rich.

How much land should there be? So far, society hasn't reached a consensus. Perhaps, nobody should exclude the possibility of a consensus on the amount at the end of the debate. If the government does decide to flood the market with excessive land supply, it'll certainly create an impact on expectations.

Now, no government in the world would crash the market in order to rein in runaway housing prices. But public outcries are just so loud that it would be unrealistic for the Tsang administration not to take further action.

Will it be a revival of the Home Ownership Scheme? More land supply? Or a ban on mainland buyers? It's anyone's guess.

Hong Kong seems to be very close to the critical point that may usher in the next phase of the cycle.

Another crash, perhaps? Better watch out for the warning signs.

 

SOURCE: The Standard

 



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