Land policy critic's book is a surprise hit
The Real State Is Real Estate
We trim, blend, and append three 2010 articles on Land and the Ruling Class in Hong Kong, a book about real estate hegemony in that former British colonial port by Alice Poon from: (1) South China Morning Post, July 23; (2) the Amazon Review page by Gary Watson (Canada Book Review 2007 September and October; and (3) Asia Sentinel, Nov 4, Poon’s answers to an interviewer. Poon worked for eight years as a personal assistant to Kwok Tak-sheng, the late Chairman and legendary founder of Sun Hung Kai Properties, the largest developer in Hong Kong. In the 1990s, she joined Kerry Properties where she held the position of planning and development manager for nine years and was responsible for land and property valuation and acquisition. In 2000-01, she worked as a senior journalist with a North American online media group, writing analytical articles on developers and the property market in Hong Kong.
by SCMP, by G. Watson, and by A. Poon
Land policy critic's book is a surprise hit
Land and the Ruling Class in Hong Kong -- which criticizes past and present governments for favoring major developers with high-land-price policies -- was the surprise hit of the Hong Kong book fair. It has become a hot topic among executive councillors, activists, economists, and columnists.
The book says weak government and the dominance of Hong Kong tycoons contributed to the formation of cartels in the real estate market as well as in telecoms, retailing and utilities that affect the livelihood of everyone in Hong Kong.
Among the suggestions that have sparked debate, Poon urges the government to consider implementing land value taxation to target property lying idle in developers' land banks.
First proposed by American political economist Henry George in the 19th century, land value taxation was designed to check uneven wealth distribution brought about by land ownership monopolies.
"If someone bought a piece of farm land and left it idle for years until the area was rezoned for commercial or residential use and the surrounding infrastructure was completed, the person should be charged a land valuation tax as he has done nothing but benefit from land appropriation," Poon said. "Pittsburgh in Pennsylvania and a couple of US states tried out the system and it appeared to be effective."
From the Amazon Review page
"Oligopoly pays." Although Hong Kong is often characterized as one of the world's freest economies, it is in fact controlled by a handful of wealthy individuals and companies who stifle -- rather than encourage -- competition.
Hong Kong's "big money" owe their growth and security to dominance over a wide spectrum of businesses ranging from transport, public utilities, supermarkets, and food distribution to, most importantly, land development.
Huge amounts of real estate are developed by a handful of large companies who control all aspects of supply, construction, and property management. Hong Kong's market suffers from steep barriers to entry and government policies that bolster the positions of a half dozen huge conglomerates.
Government "of the rich, by the rich, for the rich" has damaged civil norms and deprived Hong Kong’s population of economic security and well-being. Articulate protest groups have lodged forceful criticism of "business as usual" and gained widespread support.
While Hong Kong's once-vigorous and argumentative press has lost its teeth following the Mainland’s takeover, new outlets such as blogs have supported free expression and democratic principles.
With Shanghai rapidly eclipsing Hong Kong as the banking and finance powerhouse for China's breakneck growth, there's a chance that competition may make for the kind of "popular" entrepreneurship long absent in Hong Kong.
Real estate hegemony
In the 80s and 90s, a period that saw the longest bull trend in the property market, no other business was as profitable as that of property development. In the 80s, leading developers could still be considered as honest business people who were very mindful of their reputation. Beginning with the 90s, when almost everyone was caught up in a frenzied speculative mood, greed seems to have superseded ethical sales practice for developers and even many of their employees have become property speculators.
My views were formed from my work experience and from reading books about the inequalities that arise from land monopoly and from my research. I was particularly influenced by Henry George’s Progress and Poverty, 1879, which was the most widely read book in the 1880s (second in popularity only to the Bible). George’s analysis over twelve decades ago, of how land hoarding and land speculation led to great social injustice and a wide rich-poor gap, could still be aptly applied to present-day Hong Kong.
Neweekly of Guangdong: Hong Kong people have a much stronger aversion to property prices going down than to prices going up. Why is there such an anomaly?
This is one of the key obstacles impeding constructive changes. Over 2 million homeowners in Hong Kong may not wish to see a drop in property prices, especially those who may have entered the market at a high point. But if these homeowners have adult children who are potential home purchasers, they probably would understand that lower property prices might not be all that bad.
Property purchasers can be grouped into three categories: (1) those who view property as a living space; (2) those who view property as an investment which is expected to yield a good return to the investor (it is usually their second or third property); (3) those who treat property as a commodity from which quick money can be made by flipping. It is my belief that those in negative equity who took to the streets to protest in July 2003 were mostly from the latter two categories.
It is highly unfortunate that Hong Kong has for a long time been dependent on the property development industry as an engine for economic growth. There was a good chance to break away from this dependence in the early 2000s when the property market was in the trough, but that chance was missed.
Neweekly of Guangdong: For many mainland local governments, the proportion of land revenues to total fiscal revenues is already higher than that of Hong Kong. In other words, cities in the mainland are even more dependent on the property sector than in Hong Kong.
More and more rich mainlanders, who are willing to pay a high premium for better living conditions and purchase Hong Kong property, is one price-prodding factor. Hence mayor Donald Tsang announced a temporary removal of real estate from investment asset classes for immigrant applications, starting 14th October, 2010.
Neweekly of Guangdong: The land system is closely linked with the political system. Does it mean that without reform to the administrative systems, the phenomenon of real estate monopolists ruling Hong Kong cannot be expected to change?
Yes, I would tend to think so.
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