Economic liberty under threat from affordable housing

The South China Morning Post declares a conflict between free-market principles and the need for affordable homes. This implies a new definition of a free market: government ownership of all land; an official policy of keeping living space in artificially short supply in order to push prices up; and a rent-seeking cartel in which just two developers currently produce 70% of the supply of new apartments. But it is a mark, not only of the economic illiteracy of headline-writers but of how people in Hong Kong have essentially become brainwashed over the years to consider this tightly rigged property market as normal. It is only now, with a zero-interest-rate bubble forming at a time of an unprecedented wealth gap and disaffection that citizens are tracing problems back to root causes. The Chinese translation of Alice Poon’s Land and the Ruling Class in Hong Kong couldn’t have come out at a better time.

The Post article is a reminder of how the Big Lychee, like Macau, is effectively being prostituted to the crooks and parasites who plunder China and need somewhere to stash their loot.  More than a third of new Hong Kong luxury properties went to Mainland buyers in the first half of the year, as did a smaller but rising share of cheaper homes. And what do they get in return for buying grotesquely overpriced living space from the tycoons? Hong Kong ID cards, courtesy of our government!

Perhaps this all just fell together by accident, but it happens to serve the Chinese Communist Party leadership ideally, giving their cronies and relatives and other elements that prop up the regime a convenient and understanding Monte Carlo. A local clampdown on Mainland buyers would help put such scurrilous thoughts to rest.

One obvious solution to Hong Kong’s housing mismatch is to ignore it until the bubble bursts. But our politicians are under pressure. When Chief Executive Donald Tsang launched a public consultation exercise on subsidized housing, it was fairly clear he had a pre-determined outcome firmly in mind. But it now looks increasingly likely that he will have to do something he hates to do and take some action.

One alternative to direct subsidy is to attach conditions to sites being auctioned to require developers to supply the local market with the housing it needs. This is considered normal in many parts of the world, but the idea will have officials throwing their hands up in horror here. First, they will say with a straight face, it interferes with market forces – as if the whole pile of intervention, collusion and other price and supply distortions is a free and natural state of affairs. Second, also with a straight face, they will say how important it is to maximize government revenues – when there’s half a trillion bucks sitting pointlessly in the reserves.

The readiness of our local leaders to confront the interests of property tycoons and money-laundering Mainlanders could give an indication of who’s really calling the shots. But maybe they’re just cretins.

Down at the bottom of the Mid-Levels Escalator, just a few yards up from Queens Road, lies an interesting little patch of real estate: the site of the Stanley Street dai pai dongs. A few days ago, this alleyway was covered in grimy green canvas awnings, beneath which sat hungry diners slurping cheap noodles al fresco, as they have for decades or more.

A bit of historic heritage passes away. Except the place is being renovated. A real gas line will be installed, and someone will possibly introduce a more hygienic arrangement for washing all the plates (currently done by a lady in wellington boots squatting in a dark sub-sub-sub alleyway). This is the result of government listening to public opinion and not eradicating things local people like and can afford and replacing them with overpriced crap for tourists. At least that’s the theory. We will see in a few months when they re-open the Stanley Street Outdoor Dining Dai Pai Dong Experience Themed Amusement Zone.

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8 Responses to Economic liberty under threat from affordable housing

  1. Maugrim says:

    The Stanley Street Outdoor Dining Dai Pai Dong Experience Themed Amusement Zone, brought to you by the same planners who designed the Ngong Ping experience.

  2. Ngong Ping says:

    Ngong Ping – go when it’s cloudy to avoid being distracted by that ugly bhudda statue

  3. Rachman says:

    Zzzzzzzzzzzzzzzzzzzz………..

    We have heard your and Ms Poon’s cartel/land starvation theory the past five years ad nauseum. Put another record on please. Or at least lie back and do some real thinking.

    Like a dog who has discovered a rabbit warren, you constantly bring your theory to our attention. Sadly, it ignores two great and uncomfortable truths which largely demolish it.

    1. Without a stupid and greedy market for the concrete hutches and the insensibility of local Chinese regarding quality of life, there would not be an opportunity for the property developers. There would instead be large refugee camps on outlying islands, full of people breathing real air and living something like a real life.

    2. Without a stupid and compliant expatriate business community, the high rents demanded by the property moguls would not be met. Instead they would set up office and move their staff to go-ahead places over the border.

    One last time: HONG KONG PEOPLE DO NOT DESERVE BETTER.

  4. Jack Russell says:

    “There would instead be large refugee camps on outlying islands, full of people breathing real air and living something like a real life.”

    What, like Discovery Bay?

    Someone has to keep hacking away at this subject. If you don’t like it, don’t read it.

  5. Doctor Doghouse says:

    Rachman wrote: “One last time: HONG KONG PEOPLE DO NOT DESERVE BETTER”

    Thank goodness that’s the last time. Now, off you trot.

  6. Peter B says:

    Forget all the previous stupid comments. You have hit the nail on the head !. What’s all this BS about new govt measures to curb buying of HK$12M flats ? Who in HK can afford a 20 Y mortgage on a 12M flat as soon as interest rates return to normal ( except speculators and mainland buyers, and good luck to them) ? I recall taking a HK$5M mortgage in the early 1990’s and the repayments were 120% of my salary ! Having bought back into the property market last year at the nadir of the post WW economic crisis, the LAST place I would buy is a new flat – hideously over priced / sq foot and horribly low efficiency ( not to mention low ceilings). Of course I bought old properties , then redecorated through-out and got a 5% rental return ( just), which is what I should be able to get by just putting my money in the bank in any normal society . Let the buyers of these new properties get stuffed ….. I would not live in them even if paid to do so

  7. Kea says:

    Of course, you actually did go and build a giant refugee camp out on an outlying island, you would be an illegal squatter with no title to your house and the government could kick you out at any time it decided it wanted the land back to build another stupid theme park. So forgive us undeserving stupid Chinese folk if we decide not to avail ourselves of that option. Also, unlike the denizens of Disco Bay, most of us don’t have 2 hours and $60 round trip to blow every day on going to our jobs. So there goes that theory.

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