The Hong Kong government has been trying to rein in soaring home prices since 2009. However, its efforts, including adopting increasingly stringent measures, have failed to cool down the red-hot market.
The Centa-City Leading Index, a gauge of price movements in the city’s secondary home market, has spiked to 177 points, more than triple the 57 points recorded over the last decade.
By contrast, mainland authorities appear to be doing a better job, thanks to Chinese President Xi Jinping’s clear policy directive and a series of extreme measures unthinkable in a free economy like Hong Kong.
In 2016, the Chinese leader stated: “Houses are for living in, not for speculation.”
Heeding the call, local authorities have adopted various curbing measures, which to a certain extent have tamed runaway home prices, especially in top-tier cities.
Apart from purchase restrictions, some cities have introduced a lottery system, whose winners get the chance to buy an apartment.
In other cities, stringent price control is imposed: property vendors can only sell apartments at the same level as last year’s price, if not lower.
To be able to secure sales permits and have their capital recycled, developers are forced to accept lower margins.
Since last year, the State Statistics Bureau has stopped publishing the national housing price index on a monthly basis. Research institutes in the private sector are barred from releasing a similar index.
In making such moves, authorities want to make sure that rising home prices are not in the headlines as such stories often fan speculative demand.
Asset prices are sometimes about market expectations. If the government can send a clear message that it would take a tough stance to tame housing prices, it would help in managing market expectations.
The importance of these short-term measures is that they help authorities to buy time and allow long-term policy measures to take effect.
Complementing the short-term measures, the central government has also formulated a set of long-term measures, including boosting land supply in first-tier cities, encouraging the development of apartments for long-term rentals, tightening the hukou policy of household registration, and diverting housing demand to smaller cities.
This article appeared in the Hong Kong Economic Journal on April 19
Translation by Julie Zhu
[Chinese version 中文版]
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