More Land Is the Answer, or Not?

Amidst Hong Kong’s clamoring for sky-high property prices to be reined
in, there have been incessant calls for the SAR government to increase land and
property supply. I, for one, was at one time besotted with the thought that
releasing more land could eventually dampen prices, if still skeptical over the
prudence of dishing out more land to the same cartel that is already sitting on
huge land banks (because highest-bidder-wins-policy would ensure that deep-pocket
developers would, more often than not, end up the winning bidders).

Having observed this year’s
government land tender results, it seems the larger tracts, like always, have fallen
into the hands of leading developers or State-owned mainland developer (to
quote a few examples: a sizable Yuen Long lot went to Sun Hung Kai Properties; two
large Tseung Kwan O lots went to Wheelock Properties, two Kai Tak lots went to
China Overseas Construction). Owing to bidders being able to use nominee
companies (whose parent companies may also be nominee companies) in land
tenders, it is impossible to know from officially announced tender results who
actually got the other sizeable plots.

As for the land tender
prices, they are, as always, marked closely to the property market, where
prices have barely fallen from the historical peak. The palliative buyer stamp
duty and special stamp duty – the so called “piquant measures” – have so far only
managed to reduce property turnover, but hardly the prices. But already
property vested interests are nagging for a repeal of those measures, which
have been introduced for only a few months.

It would seem that my
earlier tinge of optimism about increased land supply being an effective impetus
to eventually bring property prices down to more affordable levels seems
misplaced. I unwittingly overlooked the crucial fact that the government and
the leading developers have never ceded their firm grip on land and property
prices, simply by virtue of their collective ownership of almost all of Hong
Kong’s buildable land. They have a common interest in keeping prices high,
though for different reasons. The former wants to maximize land sale revenue for
its fiscal health, so that it can continue to trumpet to the world that Hong
Kong has the unique advantage of a low-tax regime. The latter want to continue
to fatten themselves with development profits and rents. They are no different
from a clique of bakers who have monopolized the supply of wheat flour – they
naturally have the power to manipulate the price of bread.  

It is apparent that, as
long as the high land price policy that the Hong Kong government embraces with
all its life force remains intact, no matter how much land is released into the
market, it’s not going to have the desired impact on property prices, much less
on the entrenched status quo. History shows that every market dip in the past
was caused by an external event or internal chaos rather than an increase of
land supply (of course the property cartel would try to dupe the public into
believing the latter being the culprit). On the other hand, past experience has
taught many of the older generations (including civil servants) that their best
bet is “if you can’t beat them, join them”. Such an attitude towards buying and
owning properties has been institutionalized over the years, and is deeply
embedded in the social consciousness. Naturally, homeowners would want to see
prices stay up, whose expectation can be self-fulfilling. Homeowners would
rather use all their savings to buy more flats for their offspring than see
property prices fall significantly for the greater and long-term good of
society.

The only problem is, at
least some clear-thinking and independent youngsters and individuals who have a
sense of justice are finding that this game only favors those already with
capital (equity in homes) and is grossly unfair to those without at the
starting point. They can see that Hong Kong’s addiction to properties is stifling
healthy innovation and creativity, the lack of which is taking a toll on its
economic development. For those who are grassroots and those who by a stroke of
bad luck have slipped onto the lower social echelons, living in decrepit sub-divided
flats as well as enduring bitingly high rent is their only option until
subsidized flats become within reach, if they ever will. These unfortunate
have-nots, along with the haves, all need to pay a lot more than would have
been necessary for their daily needs and consumer goods because of obscene
rents.

The SAR government’s vacuous
vows to increase land supply or to search for more land to build affordable
flats are at best a feckless attempt to teach guileless Hong Kongers simple Economic
theory about supply/demand equilibrium, and at worst a red herring aimed at
diverting the public’s anger away from its perpetual collusion with the
property cartel (which should now include powerful mainland developers).

Thus, CY Leung and his
administration, knowing full well that the Gordian knot to Hong Kong’s social
and economic ills (including the much condemned wealth gap) lies in the government’s
high land price policy, its addiction to financing itself with land revenues
and the regressive tax system but lacking the courage to touch them, can only
put “band-aids on top of band-aids”, as one internet commentator jeered. At the
same time, society’s institutionalized belief in the magic wand of properties
is providing good excuses for inaction on government’s part.


Comments

6 Responses to More Land Is the Answer, or Not?

  1. Zexu Lin

    October 17, 2013 at 8:36 am

    Elimination of comment is the last refuge of the scoundrel

  2. Zexu Lin

    October 17, 2013 at 1:33 pm

    Alice Poon has removed my comments on her article:
    “A Case of sheer Jaundice (or, a little veracity would be good)
    ‘Thus…the Gordian knot to Hong Kong’s social and economic ills…lies in the government’s high land price policy, its addiction to financing itself with land revenues and the regressive tax system.’
    HK govt’s addiction to financing via land sales [Thus controlled land releases; ergo, sky-high property prices] and regressive tax structures. Who in the hell introduced and put in place these policies???
    Alice Poon blames CY Leung and the SAR government for this. This is an utter rewriting of history. Public financing via land sales and minimal tax were put in place and continually reaffirmed by the British colonialist administration. It is the White colonialist administration who long ago set in place these eccentric and long-term unviable policies; not the SAR.
    This goes to show the constantly one-eyed, jaundiced perspective of Alice Poon – she continually puts Whites on the pedestal and blames and excoriates those of her own colour. As she herself puts it ‘In Praise of White’ and, unexpressed, the putting down and contempt of the Chinese. Ironic isn’t it? Maybe she no longer considers herself Chinese; she’s now French.
    A little balance would be good.”

    Alice Poon is well prepared to put forth her one-eyed, jaundiced polemic. But when others reveal her prejudices, and affectations, she removed such exposures forthwith.

    Alice Poon is an effete, vacuous person-of-straw; a poseur, nothing more.

    • Hon Tron San

      November 25, 2013 at 7:24 am

      All scholars concluded that there is no doubt the Diaoyu Islands belong to China.

  3. Observer

    October 17, 2013 at 2:59 pm

    @ Zexu Lin
    The “white” and “British colonialist administration” may well have introduced these policies, which was indeed wrong. I believe that nobody should be able to use government and entrenched economic power to systematically enrich themselves at the expense of others (no matter what colour their skin is or where they come from).

    However, it has been 16 years since the handover and the government has not achieved any improvement in the situation. In fact the general sentiment seems to be that government policy has made things worse. It is generally accepted that the government is in bed with the property developers at the expense of non-property owners(although I am sure tycoons and property owners are generally happy enough with the results).

    Incidentally, before 1997 extensive public housing was provided by the government, which has not been the case since. One might have expected that a Chinese run government would do more to help its own people than the British colonialists? How about spending the last 16 years changing government policy and building affordable housing to help the people of Hong Kong? Maybe next year?

    A couple of points to conclude:
    1) It seems to me that the time for blaming the British for present day problems in Hong Kong is long past – need to look a lot closer to home.
    2) You are letting yourself down with your public displays of xenophobia and insecurity.

  4. Karen Eliot

    October 17, 2013 at 8:52 pm

    Alice Poon is an effete, vacuous person-of-straw; a poseur, nothing more.

    Zezu Lin… Well, done. Not. You demonstrate that 1960s Cultural Revolution tactics are alive and well.. attack the message, attack the messenger. Way to go, comrade.

  5. Lori Fan

    October 23, 2013 at 8:42 am

    @Zexu Lin: You are correct that the “whites” put the present land policy in place. But over the past 16 years, we corrupt, myopic, greedy and unimaginative Chinese have done not a single thing to improve the situation.

    If anything, the corruption and collusion between CHINESE oligarchs and the mostly-Chinese Hong Kong civil service was kept under a smokescreen during the last two decades of the colonial administration. Since the handover, there has been no attempt to hide the fact.

    If you’re going to criticize policy and fair commentary based purely on the race of those involved, then look yourself in the mirror and ask why collusion, corruption, and totalitarianism are so unashamedly practiced by CHINESE in the Mainland and Hong Kong.