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.