The corrupt nexus that harms almost everyone in Hong Kong must be broken. Senior Government officials feather-bed four super-rich families, controlling owners of Sun Hung Kai Properties, New World Development, Henderson Land and Cheung Kong, with economy-skewering policies that they can not find the gumption to change. Most people pay rents. They are so high in part because of this Government collusion with the rich. In every way Hong Kongers pay for these misguided policies: from high prices at supermarkets to the cost of a beer or burger at a restaurant. Carrie Lam has spoken of an inquiry into the causes of the city’s troubles. Ending this corrupt nexus should be at the heart of any moves to reform Hong Kong.
The average price of a property in Hong Kong is US$1.235 million, the world’s highest (CBRE, a real estate services firm). This translates into a per square foot price of US$2,091. The comparable figure for Singapore is US$1,063 and Shenzhen US$726. Hong Kong Government control of land sales prices is at the root of this damage to the entire economy and virtually everyone’s livelihood. Land is withdrawn from sale if the Government can’t get a high valuation. Release of land has slowed in the past two years. The property market has an imbalance between supply and demand that drives prices. Government officials and the big developers rub their hands. These real estate colossi are sitting on farmland that could provide 150 million gross floor space of new housing (CGS-CIMB Securities). Only 3.8 per cent of total land in Hong Kong is given over to residential property.
There are solutions. Many would argue that the protesters demonstrate against the wrong things. The corrupt nexus works in part this way. Government requires billions of dollars in upfront premiums when it sells large blocks of land. Thus developers without deep pockets are shut out. Only the Big Four and a few cohorts (eg Sino Land, Wheelock Properties) can play. One solution is put forward by the activist David Webb. Instead of charging 3 per cent ground rents as it does now the Government levies ground rents of 30 per cent. Upfront premiums would not therefore need to be so prohibitive. More players could enter the market, diversifying it. Also, the fat cats sitting on all that land should be forced by penalising tax to develop it. And laws need to be changed so that the Government can more easily order freeing up of brown lands for homes.
Only imaginative, bold policy changes can give ordinary Hong Kong people affordable homes. Public-private partnerships building flats on a mammoth scale could help do it. The Government uses part of its $1 trillion surplus to finance its share. Private developers are profit limited — as the power companies are now — to perhaps 15 per cent. The Government and the private sector combine to give the people hundreds of thousands of square feet of new homes over time. Obscene mini-flats are banned; the Government decrees apartments must be at least 700 sq ft. This is a workable partial solution to Hong Kong’s housing crisis.
New World Development has a stock market valuation of US$104.350 billion, Cheung Kong $268.78 billion, Henderson $187.73 billion and Sun Hung Kai $329.4 billion. Aren’t they rich enough, Carrie Lam? Break the corrupt nexus.
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