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There are multiple reasons behind escalating property prices in Hong Kong. The public focus now seems to have zeroed in on the strong demand for luxury apartments by mainland buyers.

Industry surveys estimate that purchases by mainlanders accounted for more than 30 percent of all luxury apartments sales in Hong Kong over the past several years. This has led to the belief that they were responsible, at least partly, for pushing up overall property prices in Hong Kong.

The reason is that the seemingly insatiable appetite of the mainland buyers has encouraged Hong Kong developers to build more luxury apartments and fewer medium-to-low price apartments for Hong Kong home buyers. The reduction in supply has in turn driven up the prices of mid-range apartments to less and less affordable levels.

Industry analysts have noted that many mainlanders are buying luxury apartments in Hong Kong with the aim of obtaining the right of residency. A mainlander who invests more than HK$6.5 million in Hong Kong properties is entitled to come to Hong Kong as a permanent resident. The immigration law was introduced in the early 2000s when the Hong Kong property market was in the doldrums after being battered by the Asian financial crisis in 1997.

Many commentators and some politicians are now calling for the government to introduce some restrictions on overseas, mainly mainland, acquisition of Hong Kong properties, as a curb against runaway prices. This call is becoming more shrill since the measures introduced by the government earlier this month to stabilize property prices are widely seen to have produced scant results.

This is putting the government in a dilemma. Any form of restriction on overseas capital flow can be seen as a major deviation from the government's free-market principle. What's more, the expected stiff opposition by the property developers and their formidable allies in the legislature would make the passage of the proposal into law a long and tiresome process.

A more viable alternative is to drastically raise the minimum amount of investment for immigration. That amount needs to be revised anyway, taking into account the explosive economic growth on the mainland in the past five years, creating many more multi-millionaires with the desire, for one reason or another, to obtain the right of abode in Hong Kong.

Some commentators have suggested raising the investor entry level to HK$10 million. That appears to be on the low side if you count the Rolls-Royce sales on the mainland. As a Hong Kong person, I'd like to think that the right of abode in my home town should be worth many times more than a car.

The government may consider attaching additional conditions for immigration applicants. In addition to investing in Hong Kong properties, the applicant should also be required to invest in a business with a specified minimum capital, employing a specific number of Hong Kong people.

Job creation should make the immigration policy benefit a wider segment of the local population, rather than to appear restricted only to property developers. Those measures would also lessen the concerns of local citizens about the stress on the social service infrastructure arising from the increase in mainland immigrants. For that reason, the risk of a public backlash should make property developers think twice before rejecting the proposal out of the hand.

In the longer term, of course, the government should revive the Home Ownership Scheme to provide affordable housing to middle-income families who have been priced out of the property market. The interest of the people must take precedent over that of the property developers hiding under the skirts of a faux free-market principle.

The author is a staff writer.

(HK Edition 08/24/2010 page2)