Price transparency needed amid homes euphoriaEditorial | Mary Ma 6 May 2019
For better or worse, euphoria is quickly returning to the local housing market, and it's only a matter of time before property prices surpass the record highs reached last year.
According to Centa-City Leading Index that tracks home price movement, costs continued to rise, with the latest index rebounding to 183.92 - just a few points below the historic record of 188.64 set last August.
It's intriguing because Hong Kong recorded at the same time its weakest quarterly economic growth in a decade. The disconnection between economic activities and housing costs couldn't be more evident.
What happened this time a decade ago? Then, the SAR was reeling from the global financial crisis set off by the US subprime mortgage crisis.
The disconnection the territory is experiencing right now is bound to aggravate the wealth disparity gap that, if unchecked, would deteriorate to generate a dire social crisis in future. Policymakers must gather up enough clout to deal with it.
Housing costs are influenced by factors like supply, demand, interest rates, economy, etc. While housing demand has always been strong along with population growth, there's a constant tug of war between developers and the government over supply.
Meanwhile, while interest rate hikes had been anticipated to help cool the property market, the hope was dashed after the US Federal Reserve ceased raising interest rates.
Worse still, US President Donald Trump has renewed pressure on the Fed to cut rates.
The encouraging trend of price correction since August hasn't only suspended, but even began to reverse in an alarming turnabout.
As housing prices soar, greater damage to the city may be expected.
What else can the government do in addition to the so-called "spicy" measures, including punitive stamp duties introduced over the years, to tame the market? Again, regrettably, a senior official admitted what could possibly be done has been.
If there is something government authorities may do, it should be about improving market transparency.
It's absolutely necessary to boost the transparency of market operations to make sure buyers have all the information needed for making an informed decision. The industry's practice of unloading newly finished units through private tender is shameful as buyers are put in the dark. It's a flagrantly unfair practice that policymakers must tackle head on.
Does it make good sense for a purchaser to pay more money for a low-floor unit than a similar flat on an upper floor?
It doesn't, but it happens repeatedly under the tender system. For example, a 338-square-foot cubicle on the 10th floor of Sun Hung Kai's St Martin development in Tai Po was sold for HK$22,305 per square foot via tender, whereas a similar unit on the 19th floor cost 16 percent less through public offering.
Similar inversion occurred on units on the sixth and 10th floors. That's utterly insane.
Although the Real Estate Developers Association has committed its members to selling at least 20 percent of their new units via public offering, that's not good enough to address the concern about a lack of transparency in private tenders.