Last night’s Chief Executive ‘election’ debate contain some flashes of authentic nastiness – almost like you would get in a real democratic campaign. Opinion polls and commentators’ comments clearly indicated that pan-dems/malcontents thought John Tsang came out on top, while shoe-shiners thought Beijing’s pick Carrie Lam did best.
Outside the auditorium, things get even less real. One of our friendly local property developers is offering a 270-square-foot apartment at HK$8 million – 11% more than a same-size unit in the same project a week ago. (The newsworthy flat is 40 floors higher, with views of the Himalayas, but we’ll let that pass.) The South China Morning Post calls this an ‘extreme display of price elasticity’. That economics phrase usually refers to how prices affect the behaviour of producers and consumers, otherwise known as ‘supply and demand’. Perhaps under these circumstances, it’s the other way round – how ‘greed and gullibility’ affect prices.
The Hong Kong housing market is getting deeper into a parallel universe’s black hole where time and space are not as we understand them. Government stamp duties have dried up the secondary market, while developers’ offers of financing have made new-build projects superficially more competitive. Mainland companies gorging on dollar-denominated assets are bidding up land prices, convincing the mentally deficient that this must force prices for finished buildings even higher. Oh, and developers are probably lying about some of their sales numbers and prices.
A worthy column calls for a radical approach to housing in Hong Kong. By ‘radical’, we mean ‘tweaking the housing ladder’. This means dividing the population up into different segments: the ones who can’t afford most sorts of housing; the ones who can’t afford even more sorts of housing; and the ones who can’t afford any kind of housing we can possibly think of. You then try to find a solution for each segment. But can’t.
The most daring idea is converting industrial buildings into residential rentals. Every other mature economy does this without fuss, but you can bet that our version must involve some extra-special Hong Kong-style freaking-out about The Dreaded Land Premiums that will tragically make it impossible in practice.
The land premiums are, after all (the article says), a major barrier to opening up older subsidized homes to the market. (Because otherwise it’s ‘not fair’.) And the land premiums similarly promise to complicate any requirement for private developers to include affordable units in their projects.
The writer eventually starts hallucinating about a situation where ‘housing for singles and the elderly could also be included in the mix and hence we could move towards building communities’. But, rest assured, the land premiums will mysteriously prevent any such bizarreness.
No word on getting rid of these land premiums, even though they seem to make the existence of affordable homes utterly impossible. Nor on getting rid of Disney Land, banning foreign buyers, or other lateral-thinking, radical, ways to fix the problem.
In a nutshell, the article (and the whole Hong Kong establishment) is saying: ‘The housing crisis is the cause of severe social disharmony, but we need a balanced solution, and we can’t find one because of land premiums – woe is me.’