Brickbat bickering over building bricks
Editorial | Mary Ma 30 Oct 2024
It was a dramatic response from Chief Executive John Lee Ka-chiu.
Had the city's former leader Leung Chun-ying not pointed the conductor's stick so far on housing - which is clearly Lee's biggest policy item apart from national security - the latter might have hesitated to respond as vigorously as he did yesterday.
The incumbent has made it clear that his administration will keep creating land for housing development and that this is his bottom line.
The message is crystal clear: even though the government cannot control the housing market, it must retain control of land supply, a major market factor.
Like all markets, property is subject to the law of supply and demand - and the variables include land supply, property construction and consumption, such as occupation.
While construction is controlled by real estate developers in the private market, land is the only variable the government can control with confidence.
In an environment that is in the doldrums, government authorities usually make less land available, with a view to bridging the supply and demand gap.
This is what Secretary for Development Bernadette Linn Hon-ho has been doing right now - in the wake of weak market sentiment, she is only making a small site in Tai Wai available for sale in the October-December quarter.
Despite the lack of a formal announcement, Linn is pressing hard on the brake pedal to reduce land supply to an absolute minimum, although she could have easily declared a moratorium as one of her predecessors did some years ago.
About two decades back, then-Secretary for Housing Michael Suen Ming-yeung responded with a nine-point policy to rescue the local property sector from a free fall.
The rescue efforts paid off - but not without dire consequences for his successors to clear up, including an acute shortage of formed land ready for use.
To be fair to former chief executive Leung, no leader would feel about it more strongly than him.
His warning - made about a week after the policy address - may have touched a nerve in the incumbent even though the former leader's warning may be intended as friendly advice.
In short, Leung's Facebook post warned against making a sharp increase in land supply without estimating accurately the demand in advance as failure to balance supply and demand would lead to other dire outcomes, from a market over-correction to a spike in negative equity.
It could be a concern if such a scenario occurred.
First, it could diminish the wealth effect and lower domestic consumption, with the effects rippling to other economic sectors. Second, it could increase risks in the banking sector.
Although the brickbats may be entertaining to observers, they are not necessarily conflicting.
Leung assumed a scenario in which development chief Linn would sharply increase land supply for housing development, whereas Lee showed a preference to prepare the sites first and release them later in accordance with the market situation.
The brickbats were, at most, a storm in a teacup.
Rather, the question that begs answer is: how is the land formation to be financed? By borrowings, again?
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