Fund for a cause

Following the land sale results of three plots of land at Ap Lei Chau and Wong Chuk Hang, which were acquired by mainland Chinese developers, Hong Kong’s property market has become frantic with buyers and investors snapping up the remaining units in the first-hand residential market – even with prices increasing crazily.

The most extreme case was the price of a specially designed home in Tseung Kwan O, which rose by 60% resulting in more than $20,000 per square foot. For the second-hand market, both price and price index have broken records.

Although the chairman of Centaline Property Agency, Shih Wing-ching, at the beginning of the year was bearish about the market, now he has turned around and suggested prices will increase by 10%.

A lot of agents have said the golden age of property has returned. Buyers are concerned property prices will go higher as Chinese capital floods the real estate market.

Nowadays, the cost of a home is expensive, but they are afraid that in the future it will be even more expensive.

Thus, it is not exaggerating to describe the present situation as “buying because of fear”.

Even if the government launches new measures, they will have no use.

The new SAR government should have new thoughts about the whole situation even though it may mean going beyond the norms. The government’s measures are similar to the story of Xiayu’s flood control in ancient China. They are short-term and of limited effectiveness. The most important thing is how to divert the buying power.

The government emphasises that housing requires long-term planning, starting from land development, and it is impossible to help with insufficient supply. It is true, but to be honest, when there are more offers, the residential prices may increase so fast and high that eventually the bubble bursts. Thus, timing is critical in home supply. It is undesirable to see new supply meet with weak demand.

Nowadays, there are many financial products. It depends if the government can turn housing into a financial tool which is hooked to property prices to investors to divert the influx of capital.

One of the possibilities is to package those flats under the Home Ownership Scheme without paying the premium into a fund and sell them to investors. In theory, if the price goes up, the premium will go up too. If the buyers invest in this fund, they will benefit from the increase in property prices.

A more daring thought is that since the government owns a lot of saleable land, the government could package them as a fund and sell them at market price.

Many property buyers are very annoyed because their amount of savings can never match the increasing prices. If they buy the fund and choose to contribute monthly, in the future, when the land is sold, the investors could get their share of the money. In this way, investors will also benefit by the rise of property prices. It will help to release the annoyance of any property buyers.

Of course, this suggestion still has a lot of details to discuss. I just hope there are more suggestions like this to the new SAR government to deal with the rising and slump of property prices.