Hong Kong's new leader will tackle property tycoons

Leung Chun-ying, Hong Kong’s chief executive in waiting, has the industry knowledge and political will to address the city’s high housing prices, according to Citic Securities.

“Making house prices more affordable to middle- to low-income families is likely to be high on his agenda, as there is too much complaint about prices in Hong Kong now,” said Adrian Ngan, a property analyst at Citic.

Leung, 57, posted a message on Facebook after winning the election on Sunday, saying that he would address the problem of income inequality, high inflation and property prices, which have all led to growing resentment among the city’s working population.

Leung is hardly the people’s choice — more like the lesser of two evils — but he will need to build public support if he is to see the end of his full term in 2017. Styling himself as a man of the people, he has written on his blog about an ordinary upbringing as the son of a policeman, and even claimed that as an 11-year-old boy he sold plastic flowers with his mother to supplement the family’s income.

By contrast, his main election opponent, Henry Tang, is the wealthy scion of a Shanghai textile family. His luxurious Hong Kong mansion helped to spark his downfall, thanks to allegations that he had built an illegal 2,000 square-foot underground wine cellar.

It is hardly surprising that property is such an emotive issue in Hong Kong. During the past few decades, the property sector has been a pillar of Hong Kong’s economy, both in terms of its contribution to GDP and to the government’s revenue.

However, while real estate assets have generated substantial wealth for the city’s big property developers and wealthier individuals, there are still tens of thousands of people living in cage homes. Soaring property prices have made Hong Kong one of the most expensive cities in the world — and with one of the biggest wealth gaps.

Unlike his predecessors, Leung has a deep understanding of Hong Kong’s property market. He opened his own real estate surveyors in 1993, was the former chairman of Hong Kong’s Royal Institute of Chartered Surveyors and has also advised some local Chinese governments on land reform.

While it is still early to speculate whether Leung will make radical changes to existing government policies, he may implement necessary changes to improve Hong Kong’s economic structure and competitiveness, noted Ngan.

“This could mean that the inherited importance of the property sector and property companies in Hong Kong could be de-emphasised over the longer term,” he said.

“Currently, Hong Kong relies too heavily on the property sector. The government has 50% to 60% of its revenue coming from land sales and mortgages are a major business in Hong Kong’s banking sector, which is the city’s other economic pillar.”

Ngan reckons that in the short to medium term the business environment for property companies will not suddenly becoming hostile. At this stage, there is hardly any other sector ready to replace property in supporting the city’s economy.

Still, Leung may face challenges from Hong Kong developers. Property tycoon Li Ka-shing has publicly voiced his support for Tang and refused to drop his support for him even after China threw its weight behind Leung. Hong Kong’s richest man is clearly not a fan, but in the current environment that may be the best thing going for the new chief executive.