Hong Kong’s hot real estate market is a good place for wealthy mainlanders and international investment bets. Their hot money, coupled with the psychological expectations that locals think property prices will continue to climb, means that the bubble will not burst.
If you think that Hong Kong’s crazy property market will magically restore its rationality one day, don’t hold your breath, you will only breathe. Hurry to forget the dream of owning a house, unless you are a wealthy person who is unscrupulous, or has a rich father, a rich mother, and no longer a six-color lottery, otherwise it is still a dream. If China and the United States do not launch a comprehensive trade war or military conflict, a mainland attack, or a SARS-like deadly disease, the local property market will only rise in one direction.
Property prices are hard to come down
If you believe that rising property prices will inevitably come down, then you are wrong. As I said before, this law of universal gravitation does not apply to Hong Kong, and it is gone forever. The decline in property prices in recent years is not due to the overheated market, but because of the Asian financial crisis, the SARS outbreak in 2003, and the 2008 global financial tsunami.
Hong Kong’s property market has rebounded rapidly since the 2008 financial tsunami. Since then, it has been overheated. The cooling measures of every SAR government have not been effective. This clearly proves that we have an irrational real estate market.
Former Chief Executive Donald Tsang has introduced measures to curb property prices, but developers and buyers are not concerned about this; his successor, Leung Chun-ying, has strengthened these measures for local and foreign buyers, but property prices continue to climb.
The current chief executive, Mrs Lam, has continued to launch a new “hot trick” this month, including decoupling the private residential market from subsidized housing. However, in the few days after the launch of the new measures, developers are still pushing the price increase, and the rushing buyers are still rushing to subscribe. In the past Sunday, the new disk launched by Sun Hung Kai Properties attracted buyers to spend hours rushing to buy.
Under the current “Spicy Trick”, local buyers are required to pay a 15% stamp duty to purchase a second unit, while foreign buyers and company buyers are required to pay an additional 15% stamp duty and sell it within three years of purchase. The owner of the property must pay a minimum of 20% stamp duty. However, Hong Kong is still the most expensive place in the world.
This is what the former Financial Secretary, Mr. Tsang Chun-wah, pointed out in February 2013 when he announced the launch of the property market “double hot tricks”: “The risk of asset bubbles is increasing. If we let the asset bubble grow, it will eventually affect the macro economy and the financial system. Stability, which will cause great damage to society.”
The irrational bubble is difficult to blast
This is more than five years ago. No one will deny that our real estate market is in a dangerous irrational bubble, but there is no indication that the bubble will burst soon. When developers continue to push up property prices and try to bypass the government’s cooling measures to attract people to buy, how can the bubble burst? When buyers believe that property prices will continue to soar and the Government is unable to stop it, how can they believe that the bubble will burst?
The Financial Secretary, Chen Maobo, told me many times during the TV interview that buyers should carefully consider overheated property prices, their affordability, and the trend of US interest rate hikes before deciding to buy a home. However, the speaker is awkward and the listener is jealous. As a policy, cooling measures have been repeatedly tested over the years, and our policy makers need to break their one-line thinking, they need to completely change their way of thinking.
I have said before that Hong Kong’s real estate market is no longer just serving 7 million people in the city. We must now serve a country with 1.3 billion people and more and more wealthy people are eager to transfer wealth. Hong Kong’s hot real estate market is a good place for wealthy mainlanders and international investment bets. Their hot money, coupled with the psychological expectations that locals think property prices will continue to climb, means that the bubble will not burst.
I hereby once again appeal to policy makers to have the courage to stop anyone other than Hong Kong identity card holders from entering the local property market, or at least to use tax or other measures to make Hong Kong property market no longer attractive to foreigners. This will be immediate and will have a cooling effect. Shi Yongqing, the founder of Zhongyuan Real Estate, proposed to separate a more affordable local market and a foreign market, and it is worth trying.
Urgent need for short-term solutions
Apart from this, there is no feasible solution. The levy of the vacant unit is only a temporary solution and has no lasting effect. Reclamation, the use of country parks, the construction of more public housing, the use of Fanling Golf Course, the termination of the small house policy, etc., are far from being able to save the fire. What we urgently need is a short-term solution.
Decoupling subsidized housing prices from private housing markets and converting land for private housing to building subsidized housing, rather than helping those eligible for housing, for those who are not eligible for subsidized housing but cannot afford private housing This will make private homes more expensive. I use the taxes I pay to subsidize other people to buy cheaper government-funded houses. But is one unit still unable to afford me?
With the formation of the Greater Bay Area, more mainland and overseas companies will set up offices in Hong Kong, meaning that we will see more mainlanders coming in and they need housing. As we have seen, they do not. Irrespective of irrational property prices, this means that the private residential market will become even more out of reach for Hong Kong people who are not eligible for subsidies or public housing.
This is the last chance. Lin Zhengyue, Chen Maobo, Director of Development Bureau Huang Weilun, Secretary for Transport and Housing, Chen Fan, and other officials involved in housing policy must acknowledge that the current property market cooling measures have lapsed. There is only one solution at present – Hong Kong’s housing can only be supplied to Hong Kong. people!
Originally published in the “Newsletter” EJ Insight, the agency was authorized by the author to translate.