The longest-running English-language debate in Hong Kong is surely the gargantuan Asiaxpat thread on the local property market, which started 1,192 days ago. So far, the naysayers forecasting the bursting of the bubble have been proved wrong; the day when, inevitably, they are finally correct draws ever closer, but even at the next trough in prices in 2013 or whenever, it could well be that those who had bought five years before will still be in the black. So both sides of the argument could end up being at least half-right.
If there was one sensible thing one of our visionary top officials could do if they took a break from throwing banana skins on the ground and leaping upon them, it would be to stand up in public and say: “Anyone buying a mass-market residential property at today’s prices is likely to regret it. You will be able to buy cheaper at a later date. If you do buy now, don’t come whining to the government later like you did in the late 1990s.”
It is the last thing they will do because the spectre of lower property prices haunts the Hong Kong consciousness like memories of famine and plague gripped the Middle Eastern tribesmen who wrote the gory bits of the Old Testament. Barely a day passes (today happens to be one) when the Standard does not devote a paragraph to a deal in Taikoo Shing or somewhere where the seller made a 5% loss. The city is culturally and psychologically conditioned to viewing the phenomenon of homes becoming more affordable as a barely mentionable threat and horror. Even top policymakers seem to be possessed by the delusion that it is rising house prices that strengthen an economy, rather than vice-versa.
Economist Henry George wrote: “Rising land values do not increase the common wealth, as whatever landowners gain by higher prices, tenants or purchasers lose in paying them.” It should be framed and mounted on the wall of every government office (notwithstanding the fact that the government is the city’s sole landowner).
The property bulls at Asiaxpat see few dangers of a serious crash, for all the usual reasons (too much money, too little supply, etc). Congenital bears (I find the quirky Also Sprach Analyst amusing) have their own points; for example, the average Hong Kong family requires 11 years’ earnings to buy a typical (ie, poxy little) local home. Such (un)affordability, they say, isn’t economically sustainable. The bulls beg to differ; one fascinating theory is what one Asiaxpat participant calls the Monaco-ization of Hong Kong. (This idea goes back a few years: essentially, at least partly by official design in Beijing, Hong Kong and Macao are to be tolerated as money-laundering mini-Switzerlands for China’s elite. Therefore… it’s different this time, really.)
But forget the economics. Ultimately, something has to give because these prices are not politically sustainable. To paraphrase Henry George, for every person cheerfully talking up the market’s prospects, there is another one having to move to a smaller home or give up the supposed dream of owning an apartment. Director of Housing Duncan Pescod’s snore-inducing blather about people-oriented efforts buoying public housing suggests that the official strategy is to do nothing and wait for a market correction to decrease demand from the have-nots for more homes.
This reflects the city ethos; anything is less risky than the terrifying prospect of actively trying to bring prices down. But what are the chances that officials are miscalculating the timing, and prices do not meaningfully reverse soon, and public anger becomes the biggest risk, with – say – half a million on the streets as Henry Tang takes office on July 1, 2012?
Ronald Reagan joked that a recession is when your neighbour loses his job and a depression is when it happens to you. Rising rents and property prices seem to be affecting more and more people, and not in a pleasant way. Three items in today’s South China Morning Post seem at least one too many to be a coincidence.
Two are in the Property section: Soaring rents pile pressure on expats and Sorry shoes, but cost of a flat left me down at heel. The evidence that property prices are forcing expat families to Singapore is apocryphal; a bigger phenomenon must be the growing number of well-off Westerners getting incensed – maybe even, shall we say, politicized – at the apparent greed of landlords jacking up rents by 40%. The second story is the heartbreaking one of a reporter who insists on living in trendy Soho (on an SCMP salary) and must learn to control her fashion-oriented mental disorder to make ends meet. Still, it is a bold and radical thought for the Property section: high rents are not a universal blessing. Leaving aside the Business section’s report that Swire may sell the Festival Walk complex (to some Singaporean suckers) for HK$22 billion, we come to the front page, where we get another scare story about Mainland cuts in import tariffs hitting the local tourist industry.
Except, amazingly, the item does not predict the end of civilization as we know it should such areas as Causeway Bay suffer the full awfulness of falling rents. While it does not spell out that tourism is a parasitical industry that enriches a few landlords while the rest of us pay via the side-effects, it does point out that the concentration of tacky luxury-goods stores is making it damn near impossible to buy a bowl of noodles or a cup of coffee.
Straws in the wind.