Property bizarreness gets weirder

The South China Morning Post’s ‘Public Eye’ column sort of echoes my point that Hong Kong’s pro-democracy activists would accomplish a lot more for the city if SCMP-SubHK$3mthey channeled their energy into protesting the damage poor governance does to people’s lives. Specifically, the systematic impoverishment of nearly everyone by property and related cartels…

When was the last time you saw [pro-dems] organise a mass protest against tycoons ripping off the people? Why aren’t they throwing bananas at officials to vent anger over tycoons demanding HK$2 million for 177 sq ft flats that buyers aren’t even allowed to see beforehand?

The SCMP has to turn the argument into a democrat-bashing exercise, leading to the obligatory claim that Occupy Central’s planned downtown sit-in will inflict immeasurable harm on the innocent public. (No traffic and maybe a day off – the horror!) But the main point is a valid one. The pan-dems’ usual response to this sort of charge seems to be that we need to get universal suffrage first: then solving cronyism and other wrongs will come naturally. But it has been nearly 30 years now.

The latest real-estate bubble is related to distant central banks’ money-printing, and former Chief Executive Donald Tsang’s determination to maximize developers’ profits by (among other things) curbing land supply. We can add ‘hot money’ from China and maybe Russia and elsewhere, as also seen in London, Vancouver and other cities. On top of that is the local investor psychology, which is cynically – but it has to be said easily – exploited by the property tycoons, helped by a silent and complicit bureaucracy. The drip-feeding of units onto the market and the high-pressure and scare-tactic sales practices wouldn’t work without the herd of zombies desperate to buy.

Big developers (with official blessing) have recently scrapped planned luxury projects in order to build much larger numbers of much tinier apartments. The way things are going, the only homes the middle class will have a hope of affording are ones that are literally too small to live in. Maybe, with an aging population and declining household size, the city will in future come to need a larger proportion of micro-flats in its housing stock. Or maybe we are on course for a situation where only the publicly housed poor and the top 10% of the rich will be allowed space to have kids. Our planning and other officials aren’t saying which.

In theory, the government could set much tighter controls on what developers produce; it could require that apartments be a minimum size and even a maximum price (with resale conditions, as with the Home Ownership Scheme). Instead, the Lands Department carries on as if it’s a private-sector, profit-maximizing real-estate auctioneer, while housing officials try in vain to cool things down with extra stamp duty. (Yes – one part of the government tries to make housing as expensive as possible, while another tries to make it cheaper.) If speculators were hording vital medicines or food during plague or famine, government would intervene, but the right to keep apartments empty while people live in cages is sacrosanct. Officials don’t even seem to have the curiosity to wonder what is ultimately better for the economy and indeed humanity: expensive or cheap housing? Instead (as in other world cities right now) the nearest thing to a coherent government-wide policy is to wring hands and wait for the bubble to burst.

It’s a long time coming, and lots of people are adamant that Hong Kong has years of rising property prices to come.

Even as it is, you have to wonder: who, exactly, is buying these apartments of 250 or 300 square feet at HK$3.5-4.5 million? Where have they come from? What are they expecting to happen? What do these people look like? It’s a genuine puzzle.

Strolling down my own street a few days ago, I saw the offerings in a real-estate agency window. An apartment in the same road is for sale. It is a small-to-medium size flat with a similarly sized (ie, quite large) balcony attached. In these respects, it is exactly the same size and layout as mine – at least before mine had certain, shall we say, modifications that transformed outdoor space into indoor in no uncertain manner. I bought my flat a bit over 20 years ago, before Soho and the Mid-Levels Escalator existed and the neighbourhood was a quiet old blue-collar quarter up the hill from Central. But even so… asking price in the agency window: 9.9 times what I paid for mine. As with all inexplicable phenomena, people try to come up with a rational explanation; in my district’s case, the latest is ‘renovation of the nearby Police Married Quarters as a creative hub’ (yeah, right, that’ll make a slum worth US$1.3 million).

Multiply that sort of thing citywide, and we surely have something that’s too absurd, too bizarre, to last and which cannot end happily. Meanwhile, a massive and unfair transfer of wealth from the poor to the rich carries on, and the nearest we have to sane people are demanding that the Chinese Communist Party allow opponents to run against it in elections.

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9 Responses to Property bizarreness gets weirder

  1. Chris Maden says:

    The previous crashes in 1967, 1984, and the mini-crash in 1989 were nothing to do with supply and demand, and everything to do with events in China.

    The sustained collapse from 1997-2003 was external – the AFC and SARS – but again not supply and demand.

    The world economy outside HK is stuttering, with high leverage and low growth. In addition, China seems determined to engineer a political crisis in HK, perhaps in order that it can be seen to solve it (probably violently).

    Put them together, and the external factors are ripe.

    Would I buy if it happened? I don’t know: I’m not sure the resultant HK will be worth living in. But I do agree that the pan-dems, from their luxury apartments in the Mid-Levels, are more likely to support measures to stop the collapse of their own assets than to celebrate affordable housing for their constituents.

  2. gumshoe says:

    Chugani always seems to speak to me until he talks about democracy and he just pitches a fit. I liked his article but the weirdo transition to democracy hate was jarring. I’ll also never be able to afford a house here.

  3. Stephen says:

    Excellent article. High property prices have been a feature of Hong Kong for many many years and by god do we do it well ! Your comments about the Lands Department are right on the money. The other often spouted lie is that there is a lack of land that can be developed for residential use ? Bollox ! Think of all those factory buildings, currently masquerading as cheap office space, in Lai Chi Kok, Tsuen Wan that could be rezoned as residential space. What about Disneyland, complete with transport links and utilities ?

    But here’s a thought, although it will never happen, if the Lands Department is managed properly, by a competent Government, and at some juncture in the future Hong Kong will need to look at other ways to fund itself (certainly not for awhile with the reserves at obscene levels). Can you see a sales tax, universal / higher rate of income tax being sold to the Hong Kong public, by overpaid bureaucrats or ineffectual politicians, in exchange for lower property prices?

    Me neither.

  4. Knownot says:

    In Seoul in the 1980s, I was living alone in a very small flat. When you opened the front door, you stepped into the kitchen. The fridge was directly in front of you. There were cupboards on the floor and on the wall, and the sink and gas range were at the back. At the front of the flat there was, by Asian standards, a fair-sized bedroom, which in the Korean custom was also the living-room. At the back there was a tiny bedroom for the child or children. The bathroom/toilet had no outside window, only an opening to a ventilation shaft. Something like this may be HK’s future.

    (I hope this isn’t out of key, but there is a rare typo today, in the sentence beginning ‘If speculators were …’)

  5. White Tiger says:

    Bang on, as usual, Hemmers old boy. I’ve never bought a place in Hong Kong, essentially because at no time since I came here have I been able to afford to. Obviously, I now know that I never will.

    Am I downhearted? Not in the least. Even if I had the money to buy something right now, I wouldn’t dream of tying it up in this racket.

    Over the years, I’ve been far more fortunate than many in terms of the amount of rent I’ve paid for the three lovely places where I’ve lived. I’ve occupied my present home for fifteen years, and have just signed a new two-year contract, which will be my last as the owners of the property want to tart it up and sell/rent it to one of the hordes of suckers with more money than sense who have recently started to infest the area in which I live.

    By the time my lease is up, I’ll have been in Hong Kong for almost thirty years, but I’ll pack up and leave without a qualm. Sure, there’ll be things that I’ll miss, but overall, poor old Honkers is just ebbing away and becoming a place where I simply don’t want to be any more. One of the main reasons for this is the obscenity of the widening wealth gap largely fuelled by the very government-assisted property scam which you outline here.

    So with whatever I’ve managed to squirrel away, I’ll be off to other climes, where I can get a nice old place by the sea for a fraction of the price of one of those awful little hutches presently being touted by the vile and rapacious property tycoons. My only regret (and it is a sincere one) is that so many local people are unable to do likewise. My heart goes out to the millions of decent Hong Kongers who seem destined to endure a lifetime of low paid jobs and inadequate housing while being ground under the heel of the tycoons and their brazen confederates in the government.

  6. Maugrim says:

    A further question to be asked of the Dems is “if you were elected to Govern Hong Kong, what are your policies in areas beyond democracy?” This is an issue for HK in that we have political groups from both sides who snipe, find fault and argue. Consequently nothing gets done. The Dems should be far more proactive on quality of life issues, but I won’t hold my breath

  7. MonkeyFish says:

    Bravo Hemlock … spot on … I reckon that there may come a day, when Hong Kongers at large, figure out our political economy is a 2-man con, and families of leading pro-dems, and the families of leading pro-establishment tycoons, go to the same schools, universities, clubs, dinners and galas…. an interlocking web of relationships where everyone is united by the economic advantages that close ties with our governing Colonial Power allows, yet separated by the degree of distaste experienced and/or acknowledged by such overwhelming, collective and coordinated self-whoredom (we have always been known as outstanding entrepreneurs lol).

    Perhaps a communist movement is what is needed in Hong Kong? to re-establish ownership of the means of production by collective society, to redistribute wealth and ensure equality of opportunity to all… under the iron leadership of the incorruptible Joshua Wong, the Chinese boy who shows it is possible to rationally analyse events and situations you find yourself and your society in, and criticise …. those who are older than you! Workers (and mortgage slaves) of Hong Kong unite under the banner of Joshua Wong!!! (Marxism-Leninism-Maoism-Potism (my favorite) – Wongism thought … has a certain je ne sais quoi to it)

    We could even create a political party to give credence and legitimacy to this grassroots movement … and call it … (drum roll please) … the Communist party … oh wait …

    (disclaimer: this is a satirical comment … any motivation to join, encourage, or otherwise promote revolutionary transformational fervour … or Marxist-Leninist consciousness among our valiant proletariat brothers and sisters … is strongly limited and offset by both a cynical, pragmatic perspective, that my fellow Hong Kongers are renowned for, as well as the comfort and self-reinforcing body imprint of my rather sexy and muscular frame at rest in my armchair – a practice learnt by osmosis while allowing the foreign devils to corrupt my mind at an overseas university, of course).

  8. Joe Blow says:

    I bet you got an instant hard-on when you found out that the slum up the road was being offered for 10 times the amount that you paid.

  9. delboy says:

    Trolling the internet, as one might well do on a rainy day, I discovered this gem of a home for sale in stinky old Shouson Hill. Good to see the super rich are getting ripped off too.

    Yep. This town’s fucked.

    http://search.knightfrank.com.hk/hkg132926

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