It now seems that the government really has to do something more substantial about the property market; that is to say, a lot more than what is outlined in the budget, which is clearly too little too late.

I remembered on the eve of the handover when the property market was equally hot, or some would argue, even hotter, I forewarned the Tung Administration not to pour too much cold water on the bubble. They did not listen to me and this resulted in a big collapse. The property plunge was too big, and the government had to resort to several rounds of drastic measures to halt the implosion. Then I told everybody that a tightened supply should not continue for too long, as this would create another bubble. Again nobody listened, and now we are witnessing a bigger bubble and an even bigger uproar from the public.

I want to reiterate my position in very simple terms here: The property market cannot be regulated by short-term measures. Do not repeat the same mistakes.

The reason is simple. The gestation period of any property project, that is, the period from planning to when it is ready for occupation, is at least three to five years. The long gestation nature of the property market by itself is enough to make it typically cyclical. Thus, clumsy official intervention can only make matters worse.

Every year we see more than 30,000 newly wedded couples in Hong Kong. This can give a very rough indication of the annual domestic housing demand in the region. In terms of actual supply, the current official forecast indicates that there will be about 14,000 units available annually in the next three to five years - most from private developers, and practically none from the government. These estimates show that more than half of our domestic demand will not be met until at least the year 2015, and this situation does not even account for the growing local housing demand from mainland buyers.

Independently of how much the SAR government exerts its resources to handle the housing shortage, a few thousand units here and there will not solve the problem. Private developers will of course hurry to add more units to the market to make the most profit from the current boom. If the government follows suit, the bubble burst will surely be more explosive, leading to yet another big fall.

What we urgently need is to ask some serious questions about the role of real estate in our property development plans, and the role of government as the sole supplier of land, market regulator and social stabilizer.

The author is a member of the Commission on Strategic Development

(HK Edition 03/12/2010 page1)