People’s worst, deepest, most petrifying fears typically involve scary heights, dark holes, insects, snakes, dentists or death. But in Hong Kong, nothing is more disturbing than the thought of a fall in the price of real estate.
The Standard, which makes a point nearly every morning of reporting a property deal along with the town’s weather and traffic accidents, piles on the terror today by relating in gory detail buyers forfeiting deposits and – the ultimate horror – sellers cutting their asking prices. The business section of the South China Morning Post mentions the fearsome phenomenon but calms readers with comments from the ubiquitous Buggle Lau, ‘Chief Economist’ for Midland Realty, who assures us that property buyers will return because most people prefer “less complicated investment products” than gold.
Of course he has a vested interest in getting us to think that an easily traded, shiny ingot is a more complex speculative instrument than a (perhaps unfinished) apartment requiring form-filling, contracts, deposits, lawyers, banks, government registration and stamp duty payment – and contact with the sub-human life form that is the real estate agent. What is interesting is Buggle Lau’s assumption that we have investment products rather than homes. This logic may not stand up to Hong Kong’s ultimate nightmare: government land policymaking based on the heresy that housing is a necessity rather than an asset class and, like food or medicine, should ideally be cheaper rather than dearer. As Bloomberg quotes an analyst, “A price correction is now becoming increasingly politically acceptable.”
Following the steep decline in property prices (from a sharp peak) in 1998-2003, the government’s policy has been to keep land supply and thus homes artificially scarce. The scarcity was made all the greater because officials left developers free to build ‘luxury’ (meaning tacky and vastly overpriced) ‘investment products’ increasingly aimed at Mainlanders seeking a way to stash or launder cash.
After rising anger over developers’ marketing tactics and unaffordable prices, the government has finally woken up and sold a bit of land with strings attached requiring the developer to build homes for Hong Kong people. The land auction naturally yielded less revenue than would have been the case if the developer were free to build unaffordable ‘investment products’ for outsiders. The media almost universally refer to this auction result as ‘disappointing’.
As well as idiotic prices and blatant cheating by the developers, some credit for shifting public opinion must go to Alice Poon’s Land and the Ruling Class in Hong Kong, a book that has hit quite a few raw nerves. Such as businessman and commentator Joseph Yeung’s. A few months back Yeung attacked the book and the rise of anti-developer sentiment. He pointed out that government policy rather than the property tycoons play an important role, and he claimed that the book was misleading and biased. Most of all, however, he lauded Hong Kong’s property tycoons for being Chinese rather than British (as the big developers were up to the 1970s-80s). The anti-developer sentiment, he implied, is being manipulated by pro-democracy elements. Thus, you are invited to infer, it is unpatriotic.
This suggests that some pro-Beijing elements worry that the campaign against property developers’ hegemony could translate into support for the pro-democracy camp. (In fact, the latter’s ineptness would surely preclude them from mobilizing or building on public opinion on such a real-life issue that’s staring them in the face.) It might be stretching it to say that this could explain the concerted attacks on the Civic Party over the issue of maids applying for permanent residency. Maybe not.
Either way, Yeung cropped up again over the weekend. More of which anon.
Perhaps Beijing is starting to get nervous after watching the housing protests in Israel.
Can’t understand why Beijing lets the property cartel get away with their outrageous antics. They needed the support of the tycoons leading up to & for a period after the handover but surely not now. The property cartel has a lot invested in the mainland & the mainland Govt should have them by the balls, not the other way around.
I read Alice Poon’s book earlier this year after the referrals on this website. Makes good points, but the repeats them again and again for several chapters. Read the first few chapters and you really have read it all. That said, even a few chapters are worth the money spent.
In other reading, I’m now reading Barbara Tuchman’s great “Stilwell and the American Experience in China, 1911-45”. Part biography of Vinegar Joe Stilwell, part commentary on the geopolitical attitudes towards China in that period, part observations of daily life in warlord era China; it’s a great read. I’m only just getting up to the late 1920’s and eagerly awaiting to learn more about Chiang Kai Shek, Manchuko et al.
One highlight is coming across quotes from cantakerous Westerners in the treaty ports complaining about the US missionaries advocating democratic reform in China (admittedly the missionaries were motivated by self-preservation). There are great quotes about democracy being inimical to the Oriental mind that could fall without modification from the lips of Lee Kuan Yu or pro-CCCP China fans today.
There’s also a few observations from Stilwell on day to day Japanese attitudes of growing racial superiority, fuelled by economic growth, looking for opportunities to exert that superiority on neighbours. Possible lessons for modern times. Great stuff.
And who could disagree when you see the asking prices on a few of HKs choicest properties.
Unspeakable Horror Exhibit A: a glorified shack in Tai Po
Unspeakable Horror Exhibit B: Lamma’s finest
Have to second Tiu Fu Fong’s comments regarding Poon’s book. There are numerous kernels of truth in it, but the book itself is a good example of what can be expected from graduates of an education system that does not train students to a high level of written language proficiency in either Chinese or English.
You mean there’s a difference between government policy (on development/housing) and the inalienable rights of property tycoons? I thought the latter wrote policy for the former!
Anyone know where I can get Alice Poon’s book (or at least the first few chapters)? Haven’t been able to track it down …
Big Al – I got it at HK airport in Jan this year where it was displayed prominently, but it’s probably long since been turned over in their inventory. If you’re in Central, perhaps try Dymocks in IFC Mall or Kelly & Walsh in Exchange Square.
FB3, look at the amount of development projects on the mainland by the HK tycoons and you’ll understand where HK’s wealth goes to and why the CPG supports the tycoons.
And Joseph Yeung, of course, overlooks the example of Swire, when blaming the British for pulling investments out of HK. It was either pull out or sell a big ol’ stake in your firm to CITIC (or similar) as protection money. Also note that Joseph Yeung sees high rents as alternate taxation. Strange that in most countries, taxation goes to the govt, or is Joseph Yeung acknowledging that HK’s govt is a rather thin abstraction layer on top of the real govt by the tycoons?
And the latest auction not only yielded less revenue, it was finished in one bid. Consortium of HK property tycoon, mainland SoE, and minority partner is a firm from Hemlock’s beloved James Tien. Obviously one would never suppose there’s other rationale at work for non-competitive bidding on the site beyond the economic.
When was the tipping point where Hong Kong (finally) woke up to monster that has been created;
A. Those seven towers in Hung Hom, sold to New World (and SHK) on the cheap, that New World then wanted to tear down despite never being occupied where Stewart Leung (Longtime REDA Spokesman and Director of New World) declared “The Hong Kong people has been served a great injustice” presumably that he was stopped from ripping them down by the more politically astute SHK;
B. K11 – unbelievably, and say it slowly, involving the, “Urban Renewal Authority” and not so surprisingly New World;
C. The West Kowloon Cultural Thingy – Did The Government really think they would get away with handing SHK and Li Ka Shing that much land as long as they erected a few museums and concert halls;
D. Those world record expensive Henderson developed flats in Conduit Road except they weren’t because they had not been bought;
E. And for the history buffs and just to prove to Joseph Yeung that shennanigans happened in colonial times (by Li Ka Shing) just how did he get round height restrictions to develop Coda Plaza on Garden Road ?
I could go on about how we do not have a law covering actual measurement of internal space in apartments (yes Gross Floor Area means you are paying for your share of the common area) or, to build a transport interchange on the ground floor, means lots of additional flats for sale at the sole discretion of a senior Civil Servant. But I won’t for fear of upsetting myself and it’s only Monday.
I understand that the tycoons are investing big on the mainland, my point is that they are no longer the sole source of potential investors. The Govt could say pull back on screwing HK’ers or you wont get access to these projects. There are plenty of other investors that would love a slice of the action up there.
What was once a strength is now becoming a weakness, Hong Kong needs stability but the rapacious appetites of the HK Cartels is likely to lead to unrest in Hong Kong.
Does Joseph Yeung actually exist, or not existing, has he been invented for some reason best known to his creators? His May 2011 article is the work of a nitwit.
LATE REPLY on this one
But an issue I fully endorse
I bought Alice Poon’s book but gave up after the 2nd chapter.
Of course she is 100% correct
But SO SO academic , for what we all know to be a truth
OF COURSE THERE US TOTAL COLLUSION AND IT RUNS THROUGH THE SICK – SICK HEART OF OUR WHOLE ECONOMY
( Wish I could write in something bigger and bolder than just capitals on this blog)
Read last Sunday’s SCMP ( and the Sunday magazine) for some really dirty titilating stuff , especially the REDA opinion survey result NO SUPRISES THERE … and – in the mag – more murdoch SICK news )
But , as vested intestor, ( declaration of interest time as Joe VdK would say ) I did buy property just prior to the 2000 boom/bust, and I got out without loss ( but no gain) in the mid 2000’s , thankful to having escaped with with my teeth. But then bought again, this time as a lifetime home, just at the bottom of the 2008 WW crisis , due to my Chinese wife’s accute sense of things, and now I am sitting pretty on our lifetime home which re-sales at 2 x what we paid , and which we could never afford now, even with a huge mortgage
The value of our little 700 sq feet apartment in central district is never an asset we can ever realize (unless we sell out and move to China forever)
But as I look at property prices in Central ( or anywhere thereby) and see HK$ 8 Milllion…. ! for a similar sized shoebox, I must scale that to the average Real Tax Payer ( = someone like my PA at age 45 and on H$ 25K/ month)
Sh1t . Mr K.S. Li , if ever you or any of your subordinates read this blog you should be ashamed
(My Indonsian Amah just arrived : she works 10 AM to 9 PM and I pay her OT + HK$2 K / month for her own home – because my 700 sq foot pad is not big enough for her as well as my wife and son)
REDA : take if from here if you ever bother to read READ the real truth