Turning to Singapore
The first HKSAR administration, headed by Chief Executive Tung Chee Hwa, was initially oriented towards the housing model of Singapore, where the government acts as chief provider of affordable housing for all those in need—financed by large deductions from wages and salaries. But the well-meant Tung “85,000 policy” came at the worst of times, right after the 1997 Asian financial crisis hit. His policy, which would have reinstated the previous governments’ buffer tactics by releasing more land for construction of additional public and private housing over the long term, became a convenient scapegoat for a society suffering effects of the regional financial crisis. The property cartel, which vehemently opposed that policy, and disgruntled home owners who experienced negative equity after the property market buckled in 1998, were among the most vociferous critics. Since then, neither HKSAR government has wanted to hear anything even remotely critical of their sacrosanct high land price policy.
Even now, when public opinion demands price-stabilizing measures at a time of runaway residential prices, a situation made worse by investment and speculative demand coming from wealthy mainlanders, the Tsang administration has remained unmoved. For example, it refuses to resume regular land auctions, a once normal procedure that has been in abeyance since the market trough in 2002. Public opinion has claimed that replacing regular land auctions, suspended for the past eight years, by an “application list” system is a chief cause for the current housing shortage and skyrocketing property prices; this system places the timing of sales and choice of sites in the hands of developers. But there has been no official response to such opinion. Donald Tsang has also ignored strong public demand for revival of the “home ownership scheme”, a subsidized housing program dormant since 2002.
In the face of public outcry against a heavily speculative property market, the Tsang administration has recently succumbed to public pressure and has slapped a stiff stamp duty of up to 15 percent on properties that change hands within two years. However, the new measure is not expected to affect loaded investors with strong holding power, including those mainland nouveau riches. All in all, it is nothing more than a short-term palliative that has yet to prove its price-stabilizing effect.
As researcher Yu-hung Hong pointed out in his March 1999 Land Lines article, restrictions on land supply “have encouraged private land banking and property speculation, leading to high land and property prices and making Hong Kong one of the world’s most expensive cities.” He may not have foreseen that the land and tax system gridlock would scar society in such a relentless way.
Alice Poon is the author of “Land and the Ruling Class in Hong Kong”, published in Chinese in Hong Kong in July 2010. The second edition of the English version, with a new prologue, came onto the market in early December and a simplified Chinese edition was launched in late December.