THE HONG KONG PROPERTY INDUSTRY IN 1997
At the ceremony to celebrate the establishment of the Hong Kong Special Administrative Region (HKSAR) of the People's Republic of China on 1 July, 1997, Tung Chee-hwa, the new Chief Executive of the HKSAR Government, expressed his concern over the buoyant property market in Hong Kong,
|“Rampant speculation in the property market in recent months has seriously affected our competitiveness and people's livelihoods. We will devise a range of anti-speculation measures and monitor the market closely. We will take resolute action when it becomes necessary to do so.”
A policy task force to review the housing issue was set up in March the same year by Tung, before the SAR Government was established. In a number of public meetings, Tung had urged buyers to hold off from purchasing until later dates in view of the overheating property market. As the 9 October, 1997 date of the Chief Executive’s first policy speech approached, many wondered about what new initiatives would be announced concerning the property sector. In particular, Hong Kong’s property developers and the Hong Kong community as a whole wondered whether the Chief Executive would announce moves to curb speculation and dampen prices.
Hong Kong, comprised of Hong Kong Island, the Kowloon Peninsula, the New Territories and 235 outlying islands, was located at the southern tip of China. The Island of Hong Kong had been a British colony since 1842 as a result of the First Opium War. In 1860, the Kowloon Peninsula was ceded, and in 1898, Britain was granted a rent-free 99-year lease on the New Territories and Outlying Islands, which was to expire on 1 July, 1997.
Hong Kong’s economy was considered one of the most successful economies in the world. According to the Institute for Management Development, Hong Kong was the world’s third-most competitive economy from 1995 to 1997. Hong Kong was able to achieve real GDP growth of 6 per cent per year from 1965 to 1975, 8.5 per cent a year from 1975 to 1985, and 6.5 per cent per year from 1985 to 1995. Between 1975 and 1995, Hong Kong’s real GDP quadrupled to more than HK$1,092 billion (US$140 billion) and real per capita GDP tripled to HK$181,040 (US$23,200).1 According to the World Bank, by 1995, Hong Kong’s per capita GDP was the fifth highest in the world on a purchasing power parity basis, behind only Luxembourg, the United States, Singapore and Switzerland. Hong Kong’s unemployment rate was generally low, averaging 2.6 per cent in 1996 and 2.5 per cent in the first quarter of 1997, for example.
In 1996, Hong Kong was the world’s seventh-largest trading economy and the ninth leading exporter of commercial services. Hong Kong also was the leading centre for overseas multinational firms in the Asian region. Over 200 of the 500 Fortune companies had a presence in the territory. As of May 1996, nearly 4,500 overseas companies had established a place of business in Hong Kong under Part XI of the Companies Ordinance (these were only those that were officially registered).2 According to the “1996 Survey of Regional Representation by Overseas Companies in Hong Kong”, there were 2,307 regional headquarters or offices of overseas firms in Hong Kong as of 1 June, 1996. The figure was more than twice that of any other centre in the region, and represented a 12 per cent increase over 1995. Of the 2,307 operations, 816 were regional headquarters and 1,491 were regional offices (the main distinction between the two being higher levels of autonomy for regional headquarters).
In 1984, after extensive negotiations, the Sino-British Joint Declaration was signed between Britain and the People’s Republic of China. The declaration confirmed that Hong Kong would be formally returned to China on 1 July, 1997. The reversion would take place under the principle of “one country, two systems” in which Hong Kong would become a Special Administrative Region of China with a high degree of autonomy. For 50 years beyond 1997, Hong Kong would retain its own distinct political, economic, legal and social systems. Even so, there was still doubt in the minds of some that China would honour its commitments, especially after the 1989 crack down on student demonstrators in Tiananmen Square. This uncertainty had caused some Hong Kong people to emigrate and some companies to move their offices out of Hong Kong in the late 1980s and early 1990s. Although relations between China and Britain deteriorated in the early 1990s, discussions over Hong Kong’s future continued and the arrangements under which “Hong Kong people would rule Hong Kong” gradually took shape. As 1 July, 1997 approached, many who had left Hong Kong returned, and many new immigrants came as the economy boomed and confidence improved. One result of the boom, however, had been rapidly rising property prices.