Too soon for a victory parade

(The Standard 24 Jan 2014) Housing secretary Anthony Cheung Bing-leung was victorious - or, at least, he claimed victory.
 
A day ago, the secretary for transport and housing declared the property market had been "tamed" after two rounds of curbs with a combination of punitive stamp duties. After the special stamp and buyer's stamp duties failed to prevent prices from taking off, the draconian double stamp duty was slapped on. Months of enforcement have finally seen the government win a small battle. But the real question is: has the government won the war and not just a battle? Cheung is accurate in observing that housing prices have stopped accelerating. According to the Centa-City Leading Index, home prices had been fluctuating within a narrow range in recent months. This month, the index fell through the support, which suggests property prices have peaked and begun to adjust.

Unfortunately, there are other disturbing figures. A recently published global property survey reveals that the SAR is the most unaffordable city in terms of housing.

A recently published global property survey reveals that the SAR is the most unaffordable city in terms of housing. According to the Demographia International Housing Affordability Survey, a family in Hong Kong would have to save its entire earnings for nearly 15 years to buy a home - even if its members don't eat and entertain.  Is that really cause for alarm? Although Vancouver and San Francisco ranked second and third, families there are able to buy homes with about 10 years of income.  Since the introduction of what is also known as the "double curbs," there has been an adjustment in the primary market and developers are cutting prices by offering various kinds of rebates in the double-digit range.  There are also some signs in the secondary market. For a long period, owners have been steadfast in not negotiating sale prices because of low supply levels combined with attractive rental returns. Successive price adjustments in the primary market have forced some owners of secondary properties to be more willing to negotiate prices. But there are not yet sufficient transactions to conclude that this has become the norm.  In light of this, it isn't time for Cheung to declare victory. Such a claim might be justified only if there are concrete signs that prices have begun to deflate steadily and in an orderly manner. This, however, is subject to a number of factors - primarily the movements of interest rates. But Cheung's triumphant note could not be accidental. In proclaiming victory, he was clearly trying to send a message to the community.  What is that message? Maybe it's a bid to claim a rare triumph for the government, but it's more likely the case that it wants to maintain pressure on prices by talking down sentiment. As housing chief, Cheung is naturally the man to air the message.  It is public knowledge that the curbs can only suppress demand without solving the issue. The ultimate answer is still to be found in increased supply.  Yesterday, the government announced the location of more than 150 sites on which 210,000 flats can be built over the next five years. If the government is able to continue to roll out land at its current pace, it will not only cool the market but also crush it.

Mary Ma