Saturday, November 1, 2014   




More questions than answers

Mary Ma

Friday, November 02, 2012

Executive Council member Franklin Lam Fan-keung can't seem to escape the spotlight, although the avalanche of publicity is surely the last thing he wants.

He's been criticized for selling two luxury properties in the Western Mid- Levels before the government announced its latest crackdown on runaway home prices. As one of Chief Executive Leung Chun-ying's top advisers, Lam was immediately accused of a conflict of interest.

However, no new evidence has surfaced in the past few days to substantiate this charge. It still appears Lam was unaware of the new measures, including a 15-percent tax on non-resident and corporate buyers, and a strengthened version of the special stamp duty imposed two years ago.

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But that doesn't allay public suspicions - especially after a rather dramatic twist in the matter.

So far, Lam has offered different accounts of the circumstances surrounding the controversial sales. In the beginning, he revealed he had set a minimum price for the Casa Bella units on Caine Road, and that the agent could keep any sum above that as commission.

Yesterday, he further clarified that the extra amount was not a commission - but rather a donation made to a charity of Shih Wing-ching's Centaline property agency.

That's a weird arrangement. What's more bizarre is that Centaline denied it hours later. The issue is spinning beyond the original conflict-of-interest allegation. Now it could be a matter that, in a worst-case scenario, involves the law.

Why did Lam set a minimum price for the apartments in the first place? A lot has been said that this was an inducement for the agent. The less canvassed aspect is that until the two deals were reached, Lam had been holding three apartments on the 14th floor of the 34-story single tower housing four units on each floor and two duplex units on the top floors.

According to Lam, he had listed all three units.

As one of Hong Kong's foremost property analysts, Lam would know better than anyone else that making all three units available at the same time would boost the supply, therefore putting pressure on resale prices of other units in the building, including his flats.

This wouldn't bode well for his plan since, after selling the first one, other buyers would use that sale as a comparable to bargain for a better deal.

However, whether it was his intention or not, by setting a minimum price for his own units, whatever amount one fetches would ensure the next one sold won't fall below that.

In the stock market, such a practice is called market manipulation.

A major local property developer had been taken to task by the former government and lawmakers amid accusations that it inflated prices by selling luxury units at "record prices" - only to have the "buyers" cancel the transactions.

Although not illegal, the developer faced accusations of manipulation.

Obviously, there is still room for Lam and Centaline to clarify the incident to stop the scandal from deepening further.


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