Protesters in Hong Kong are demanding political reform
but chief executive Carrie Lam's strategy to placate them
is to focus on economic issues.
The argument she and Beijing have championed
is that the unrest is due to a lack of economic opportunity.
And a big part of that is due to Hong Kong
having the least affordable property market in the world.
By one estimate the median price of a flat
is 21 times median salary.
In London, it's less than five.
So last week, Lam announced that Hong Kongers would be allowed
to take up mortgages of up to 90 per cent on a flat valued at up
to US$1m.
That is a complete reversal of 10 years worth of failed
attempts to cool the market by restricting mortgage lending.
She also pledged to seize 700 hectares of land
from developers to help ease the housing shortage.
However, the main beneficiaries of both measures
will be the one group of people in Hong Kong who
really don't need any help at all - property tycoons.
On the face of it, easing mortgage restrictions
should mean people are no longer priced out of the market.
The reality is that Hong Kong property prices only 5
per cent off their all-time high.
And accessibility isn't necessarily affordability.
Telling homebuyers they can leverage up
with prices near record highs and the economy facing
recession is a great way to put people at risk in falling
into negative equity.
But what about land seizures?
Won't that hurt the developers?
Well, probably not.
In Hong Kong, just four developers
own farm land, covering 150m potential square feet
of floor space - six times the size of Monaco.
What's more, the government will have
to pay market prices for the land it seizes.
But the kicker is that the government already
controls the amount of land released
for development each year.
The way Hong Kong's political system is structured is that
the tycoons who control developers have outsize
representation on the 1,200-person committee that
chooses Hong Kong's chief executive.
So Lam's government is incentivised
to respond to their wishes, not those of ordinary people, when
it comes to how much land is made available for new housing.
And that means developers have little interest
in any democratic reforms that can
loosen their grip on Hong Kong's lucrative property market.