Housing's player-referee paradox

Government-initiated measures to make property sales more buyer-friendly take effect today. But it remained uncertain last night how far the new regulations would be enforced.

Stewart Leung Chi-kin, vice chairman of the Real Estate Developers Association, reiterated yesterday that members would conform with the government demands.

However, he quickly added the association was still awaiting government replies to clarify some points of concern, and therefore was unable to issue the guidelines on sales practices to its members as expected.

The government admitted it was studying the queries raised, but expressed confidence this wouldn't prevent developers from complying.

This turn of events is puzzling. Could the uncertainty be related to the developers' unhappiness over the demand requiring them to release a price list three days in advance of sales?

In the latest round, the association also asked whether the conditions will also apply to sales of units currently leased as rental apartments.

Equally intriguingly, the MTR Corp withdrew a site on Nam Cheong station from tender a few days ago, after all applications failed to meet requirements.

Expensive land premium at HK$13 billion, or HK$6,500 per square foot, was blamed for the conservative bids.

For the project to be profitable, completed flats would have to be sold for HK$10,000 or more psf. Given the prevalent sentiment, it's a risky investment unless developers could lower the share of profits due to the government.

Is the withdrawal alarming? Not necessarily, since it wasn't the first time this has happened. In 2006, a Tsuen Wan West Station site was pulled back because of high land premium. It was retendered last year and awarded after the land premium was slashed by 25 percent.

Though nobody knows how soon the Nam Cheong site will be available for tender again, the incident does have a silver lining. Housing prices in the secondary market have dropped by 5 to 8 percent before meeting support again. The ripple effect is helping achieve the government's objective of lowering housing prices at a stable pace.

Nevertheless, there is a paradox to be considered. On one hand, it's a government priority to cool down the housing market. Increasing land supply and the introduction of administrative measures to regulate sales practices are part of it. On the other hand, public coffers benefit from land sales.

Therein lies the government's conflicting roles as a market player unwilling to dispose of land cheaply, while acting as the referee in regulating the actions of other players intending to reap profits in the free market economy.

Housing-related policies come under two bureaus. The Development Bureau is responsible for increasing land supply to stimulate housing production, while the Housing Bureau is in charge of cracking the administrative whip against unscrupulous sales practices.

Doesn't the tendency of "reasonable" land auction results or profit sharing go against the priority to precipitate a correction in the property sector? While the dilemma is not unique to Hong Kong - the mainland faces the same thing - this player-referee paradox should be weighed carefully.

英文虎報 Central Station | By Mary Ma