Why affordable housing is the key to Hong Kong's development

Since the generation of our grandparents or even before that purchasing a home has become the goal and dream of most Hong Kong citizens. Shelter as a basic necessity has evolved monstrously into an unattainable dream, and of those who can afford a down payment, many end up paying a large part of their monthly salary to mortgages for 20 some years. Thanks to the high land price policy, an artifact and a reminiscence of the colonial era, land price is arbitrarily set at an astronomical level because land is the only resource in the densely populated Hong Kong and premium of land sales provides an important revenue to the Hong Kong government. For an estimate of one plus million home owners in Hong Kong, the inflated properties' price has boosted their net worth and many have made a fortune themselves through real estate trading.

However, the surge of properties price has systematically divided the population into the haves and the have-nots. As the poor in Hong Kong struggles with end meets without a minimum wage protection, the rich continues to fly above the rest through real estate trading and the belief that the price is not going to fall. The notorious cage living is an example of the deprivation that exists in one of the most modern cities in the world. About 100,000 poverty-stricken residents live one by one in a cage made of wooden planks and wire mesh of about 3.7m2, an area large enough for only a mattress and a few possessions. The common belief, and also one of the core values in Hong Kong, that one can become rich if enough effort is devoted has shattered completely. One can work very hard at the bottom of the paradigm and still fail to move up the rug of the social ladder. The value of a property as an investment has overshadowed its function as a home, and that's just one of the many dysfunctions in Hong Kong and one that arguably has the biggest impact on the stability of the society.

So why is this a bigger issue now than it was in the previous decades? Afterall, Hong Kong has managed to prosper under this policy throughout the years. The answer to this question is two-fold. The first is related to the generation that have recently joined workforce and have the biggest incentive to purchase a home, the so-called "post 80". This is a generation that was brought up free of memory of war and poverty, where Hong Kong's economy was developing rapidly and enjoyed an unprecedented prosperity. Similar to the citizens of many developed countries, this generation looks beyond money as the source of happiness. Despite the universal consent that money is important and people work hard for their fair share of return, money no longer bears the kind of significance as it was to the previous generations. "Work-life balance" is a new concept that the older generations did not quite grasp. Rather than working even harder to earn a higher salary to catch up with the ever increasing property prices, they question whether it is "fair" to have a price tag so high on a basic living need. The second reason stems from the squeezing of the channels of upward mobility. As the society has become more developed, a more rigid system is in place that translates to a more qualification-focused Hong Kong. A person who did not graduate from college can still make it to the top if s/he works hard enough 40 years ago. (Donald Tsang is an example) But this is no longer the case in today's Hong Kong. The hope to be successful has diminished as a glass ceiling is present everywhere. Together with the unique characteristics of the post-80s, the institutionalization of our social system has made the price level of properties more troubling than ever.

I would argue that the traditional "let the market set the price" Capitalist approach to the housing market is fundamentally incorrect given that housing is not just another asset like stocks or commodities. Property ownership brings in a sense of belonging to the place where the owner resides. Unrest arises when wage level does not catch up with the increase in proporties prices, and people can't even afford to dream about owning a home. And Hong Kong is special in that Hong Kong citizens have no where else to go for the small size of Hong Kong and the innate social difference between Hong Kong and the mainland. Unike people in other countries where geographic mobility is significantly greater, the Hong Kong government cannot possibly ask its people to move back to mainland if they can't afford to live in Hong Kong.

In the previous regime, Mr. Tung Chee-Hwa has had the aspirations to tackle this age old problem by introducing the 85000 unit annual housing target, which earns him nothing but severe criticism for bursting the bubble and created a group of home owners with negative equity. With this lesson in mind, the latecomer has shown little willingness in cooling the housing market. So how can we strike a balance in determining a justified housing price level? I am no economics expert but we all know that in the States, the federal reserve raises interest rate when it deems the market is overheat. The influx of "cheap money" in Hong Kong is partly due to the low interest rate that Hong Kong monetary authority has set, which in the past is set to follow US's interest rate in lockstep since our currency is pegged. The result of the monetary policy an be tricky but I'd say the mere willingness displayed by the government is the single most important factor in creating a healthy housing market.




Share