The soaring housing prices in Hong Kong
By Chu Chu
NANJING, China 一 On Oct. 10, Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor presented her policy address to the Legislative Council, which outlined plans for developing Hong Kong’s healthcare, pensions, education and social welfare. One of the most pressing problems she addressed, however, was housing.
Since the return of the former British colony to China in 1997, Hong Kong has exercised autonomous rule under the “one country, two systems” principle as a Chinese Special Administrative Region (SAR). The Hong Kong SAR is one of the world’s leading financial centers with an open economy and sound legal system. It is renowned for its expansive skyline and notorious for its expensive property prices.
In fact, Hong Kong’s housing market has been ranked the least affordable in the world over the past eight years. In Mercer’s 2017 Cost of Living Survey, Hong Kong was ranked as the world’s second-most expensive city for expatriates to live in. As one of the most densely populated cities in the world, Hong Kong’s property prices and housing shortage have become a severe social issue. Many Hongkongers live in so-called “cage homes” or “coffin cubicles” without sunlight, squeezed into small living spaces which severely affects the quality of life.
Furthermore, the pace of constructing private and public housing has proved too slow to meet the demand of increasing applicants. There are around 270,000 people on the waiting list every year for public housing, for which most people will have to wait at least ten years. Until then, tens of thousands of Hong Kong residents have to endure cramped living spaces in cage homes, cubicle apartments and subdivided flats.
At the same time, prices in the rental market have become increasingly high with no sign of a downward trend. Looking at recent statistics from Nov. 9, the average price of an apartment in Hong Kong Island is HK$223,200.50, or about $28,500 per square meter, while the average price in Kowloon is HK$160,421 and HK$115,032 in the New Territories. It is no surprise that these high prices create immense pressure on residents, especially young Hongkongers who struggle to get by.
Starting in 1997, there was a sharp decline in property prices due to the Asian financial crisis. First-term Chief Executive of Hong Kong, Tung Chee-hwa, pledged to build 85,000 flats a year in the public and private sectors. He also planned to reduce the average waiting time for public rental housing to three years. However, the government announced indefinite suspension of the project under pressure from the public and developers amid the financial crisis.
In subsequent years, property prices continued to drop and reached the lowest level in 2003 due to the SARS outbreak. After 2003, the government launched a policy to attract foreign investment, which contributed to economic recovery. Since then, housing prices have continued to rise. In other words, Hong Kong’s property market is greatly influenced by changes in economic outlook and governmental policy.
Hongkongers regard land scarcity as the main reason for high housing prices. Demand exceeds supply when more and more people work and live in Hong Kong, driving up housing prices in a market where supply is already tight. But, government land-use data shows that 75 percent of Hong Kong’s land is not developed. The culprit of high housing prices is not a land shortage, but rather poor land management. The fact is that residential land in Hong Kong only accounts for 7 percent of the total land, and the region’s parks cover an area of six times the total area of residential land. Much land is left unused due to environmental conservation. While the importance of environmental protection should not be neglected, it is reasonable to say that some of these idle lands without high ecological value can be utilized to increase the housing supply.
In the short run, Hong Kong’s housing problem needs an urgent solution, such as provisional or transitional housing. Hong Kong can learn from Amsterdam’s shipping container homes, which are relatively spacious compared to Hong Kong’s cage homes. With short construction times and predictable pricing, cargo containers can be readily repurposed as housing, providing key environmental benefits, as well as safer, more convenient and more affordable housing in plentiful supply.
If the Hong Kong government is determined to mitigate the housing shortage and high prices, its policies should move towards freeing up more land. Additionally, they should develop the land surrounding residential areas to raise housing prices and motivate developers to build new housing complexes. A compromise policy might be to supply more land in districts with low land prices and for public housing.
Lam, insisting that Hong Kong still needs land reclamation, announced the “Lantau Tomorrow Vision” in her policy address. This vision centers on building a residential and business hub on 1,700 hectares of reclaimed land, which could house 1.1 million people and create a third core business district. The ultimate aim of her artificial island plan, together with the “Greater Bay Area” plan including Hong Kong high speed rail and the Hong Kong-Zhuhai-Macau Bridge, is to bring economic and social improvements to both mainland China and Hong Kong SAR. However, this will likely attract more mainlanders to work and live in Hong Kong, posing further challenges to housing markets.
After the aforementioned policy changes and construction projects are completed, it will take several years or more to assess their impacts. As for how to address the current issue and actively cope with potential future problems, Hong Kong’s government still has a long way to go.
Chu Chu is an HNC M.A. ‘20 student concentrating in International Politics.