A 400-square-foot, one-bedroom unit is being offered for HK$10 million, a palpable reminder that home prices have gone way beyond the reach of Hong Kong’s average wage earners.
“But so what?!”
That’s the impatient reply of a Beijing Liaison Office cadre when asked by reporters if she was qualified to buy two spacious condos at a brand-new Kai Tak estate meant for sale at capped rates to locals only, with additional taxes waived.
Her HK$14 million purchase raised some questions as mainland envoys, supposedly, are not allowed to become permanent residents and have their fingers in the city’s property pie.
The development falls under the “Hong Kong Property for Hong Kong People” scheme, the linchpin of outgoing Chief Executive Leung Chun-ying’s bid to make home prices more affordable by shutting out overseas – principally, mainland – speculators.
Yet the irony is that Kai Tak has now become a favorite playground of cash-rich Chinese conglomerates seeking to invest in Hong Kong’s realty sector at the expense of their local counterparts.
For instance, in a short span of four months since last November Hainan Airlines paid a jaw-dropping HK$27 billion to snatch four prime lots at the former airport site.
In fact, seven of the 11 Kai Tak plots so far put on sale have been bagged by mainland bidders.
This February, a little-known consortium composed of Shenzhen-based Logan Property Holdings and Guangzhou-based KWG Property smashed local land auction records by paying HK$16.9 billion for a 1.3-hectare plot in Ap Lei Chau.
The figure translates into HK$236,800 per square meter, an all-time high. Industry players say homes to be built on this waterfront site may fetch up to as much as HK$500,000 per square meter.
While Hong Kong’s home prices have long been unaffordable to average breadwinners, the recent influx of mainland capital into an already white-hot market is adding fuel to the flame.
Meanwhile, the home price index in Singapore has been on a slide for 14 successive quarters since it peaked out in September 2013, booking an aggregate retreat of 11.7 percent.
The market remains healthy and under check, despite earlier problems of possible overcapacity.
The polar opposites taken by the property markets of the two Asian economic rivals can be traced back to the 2008 financial tsunami.
Singapore imposed a 15 percent stamp duty on all nonlocal buyers as global markets were inundated with hot money after Washington lifted the liquidity floodgates.
In 2013 the city state intensified its clampdown on speculation with a new mandatory total debt servicing ratio to regulate what property Singaporeans could afford to buy: debt servicing of any property loan must not exceed 60 percent of a buyer’s monthly income.
In Hong Kong, then Chief Executive Donald Tsang was delighted to see the inflow of colossal amounts of money to shore up the profitability of his realty tycoon friends.
It was only after repeated prodding by mainland cadres in 2011 did he reluctantly revive the Home Ownership Scheme, a key subsidized-sale program whose suspension since 2002 had been blamed by many for the runaway price surges in the following decade.
Amid the cheap money and frenzied transactions, home production plummeted to an all-time low of 21,300 units during Tsang’s last year in office, two-thirds lower than the 1997 peak.
Hong Kong government didn’t roll out other cooling measures until CY Leung assumed office in 2012.
During his tenure, Leung has unveiled several initiatives, including buyer’s stamp duty, special stamp duty and the “Hong Kong Property for Hong Kong People” scheme, to quell the market, though there were some loopholes that speculators were able to exploit to evade the extra taxes.
The authorities then raised a new flat rate of 15 percent for the ad valorem stamp duty at the end of last year.
Still, critics accused Leung of beating around the bush, saying that he has failed to show guts or wisdom to overhaul a system that is rigged to favor the city’s property moguls and now the nouveau riche from up north.
On the other hand, the Singaporean government has never acted as the de facto “guardian” of the realty sector.
About 80 percent of the population already live in public housing, and the city does not rely on the private market to prop up its revenues.
Moreover, in view of its sovereignty, the Lion City is free to slam the door on outsiders as evidenced by its resolute action against foreign speculators.
The reality in Hong Kong is that its home market is “too big to fail”, not only to the city’s indigenous moneyed class but also for the sake of mainland cadres, their princelings and big state-owned or private firms that need an offshore realty hub to park and grow their grey incomes or marshal capital away from home.
Under such circumstances, do you really believe the SAR government can become serious about dampening the market?
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