Nagging controversies surrounding the TV drama series Woju have brought the common interest of local officials and developers in high land prices under the public spotlight.
I didn't know of the series, shown on a Beijing television station, until it was publicly denounced by the government for, among other things, highlighting an issue others chose to ignore. But as a Hong Kong person, I am most familiar with the topic it tries to address.
In the late 1970s, the then British government of Hong Kong made it a policy to finance all capital projects with income from land sales. Since then, land sales have become a major source of public revenue.
For that reason, Hong Kong people have long accepted the notion that high land prices are good for the government and the property oligarchy, which has secured a stranglehold on the supply of apartments in the market. Although the policy was widely blamed for pushing up property prices in Hong Kong to unrealistic levels many times in the past, it is seen as a form of tax that has helped finance the building of infrastructure facilities needed for the rapid development of the high-value-added services industry. In that way, it is considered good for Hong Kong, too.
Another reason that this seemingly unsavory fiscal policy has never been seriously challenged for more than three decades is that the government's massive housing policy has helped shield lower-income people from high property prices. More than half of the Hong Kong people now live in government-subsidized low-cost housing estates with comparable quality to some private sector development projects.
The Singapore government has an even more lavish program that provides affordable and high quality housing to some 70 percent of the island state's population. But the one in Hong Kong is seen to be good enough in meeting the rising housing needs of the population swelled by the constant stream of immigrants from the mainland.
What's more, auctioning of government land in Hong Kong is seen to be efficient, fair and transparent. Every auction is closely scrutinized by competing bidders, property agents and the press. Reporters covering these auctions are known to spare no effort in digging into the background of the winning bidders and their business associates.
The price paid for the land in an auction by the winning bidder and its possible impact on the economy in general, and the property market in particular, are analyzed and discussed for days by market experts on television, in the press and the Internet. Under such an open system, any form of under-the-table dealings between individual officials and specific property developers as portrayed in Woju simply cannot be expected to escape detection by the public.
Despite efforts to ensure transparency, the property market has remained vulnerable to occasional outbreaks of excessive speculation that lead eventually to the so-called bursting of the bubble, leaving behind a financial mess that can cripple the economy for years to come. But none of the major players in the property market, including the big developers and banks, were brought down in recent calamities because they are familiar with the game and understand the risks involved.
Of course, there was no shortage of speculators marching to the poorhouse in every down cycle. But these are risk takers fully aware of the consequences of their exploits. Even during the Asia financial crisis when property prices in Hong Kong tumbled an average 60 percent in six months, defaults of mortgage loans by home owners remained low.
As we understand it, market transparency, augmented by the rule of law, is the single most important factor contributing to the resilience of the Hong Kong property sector, and the overall economy, for that matter. Woju has no relevance in Hong Kong.