More Land Is the Answer, or Not?

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.