HK redoubles efforts to avoid affordable homes

All Hong Kong administrations since the 1997 handover have had one (unwritten) core policy: push up housing prices and rents. The first administration of Tung Chee-hwa initially talked of lowering prices, but swiftly backtracked when the property bubble burst. That 1990s bubble was partly due to the Chinese government’s earlier insistence that the colonial regime restrict land supply. Beijing supposedly suspected that the British would run away with the land-sales proceeds, but the post-1997 experience suggests a deliberate strategy to boost the revenues of landed interests – notably developers – who had been co-opted by the Communists starting back in the 1980s.

With the worldwide uplift in metropolitan housing costs and ultra-low interest rates, even developer-worshiping officials must wonder if Hong Kong home prices have overshot and pose economic and political threats. High prices deplete consumers’ spending power, drive out economic diversity and fuel anger among the young. But Hong Kong policymakers still cannot or will not take real action.

After Chief Executive Donald Tsang’s unashamedly pro-developer policies (2005-2012), CY Leung announced an intention to restore long-term land supply. But he only dabbled in tackling the imminent affordability problem – for example, pointlessly earmarking one plot of land for apartments to be sold to Hong Kong people only.

His successor Carrie Lam is following a similar approach. She has set up a talking shop to find long-term land supply within the existing framework that leaves most obvious sources of space off-limits. And she is unveiling a ‘starter home’ concept to add a third layer of publicly subsidized rental and for-sale housing. This will probably be a small, token initiative – but if taken at face value, it implies acceptance of a situation where only the top 10% or 20% of households can afford ‘market’ prices.

Like CY, Carrie is refusing to consider lower ‘market’ prices as an option. We will hear nothing about restricting demand by curbing immigration or overseas investor-buyers. We will hear nothing about opening up land hoarded by developers, attaching conditions to land sales, or otherwise reducing developers’ influence over the market. We will not even hear much about re-zoning land or updating building and planning codes to allow bigger, more efficiently designed homes.

No-one will mention that the real issue (once you net out external factors like interest rates) is artificial unaffordability arising from official policy to maximize revenues from land-use. (The government in effect taxes housing while restricting supply, so pushes home prices up, so the tax on housing goes up even more – in a cycle that serves no fiscal or economic purpose but pads out developers’ margins.)

Like CY, Carrie is probably avoiding real action not only because she and her buddies can’t handle the horrifying idea of lower prices, but because she knows that ultimately this is built on a bubble which will burst at some point. When the tech stocks and Bitcoin and bond markets collapse, Hong Kong’s ‘housing crisis’ will be about over-mortgaged idiots in negative equity committing suicide. The longer it takes, the more risky and unthinkable addressing distorted affordability becomes.

 

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12 Responses to HK redoubles efforts to avoid affordable homes

  1. Peter Rachman says:

    Must be hell for the administration. On the one hand allowing the disaffected to afford their own homes would keep them off the street and avoid those embarrassing confrontations. On the other hand, all those establishment snouts in the trough need to be fed. Never fear, Carrie’s task force will square the circle in traditional HK Government fashion – kick the can down the road.

  2. Old Newcomer says:

    Any serious attempt to tackle the housing problem will inevitably bring the government into conflict with the Heung Yee Kuk – a prospect it probably finds more frightening than any number of “over-mortgaged idiots in negative equity committing suicide”. Yet simply resuming all NT land that is currently being used in breach of its lease terms would probably generate enough vacant space to meet ten years of housing demand. Of course, the government would then need to set up another task force to defer having to face the problem of where to put all the displaced illegally parked shipping containers.

  3. A Poor Man says:

    There will never be lower housing costs in HK until the government implements a universal social security system. The reason there is so much demand for housing is that most people need income after they can no longer earn a wage, and they view real estate investment as a good way to survive, even if the returns are only 2-3% per year. Curry Lamb seems to acknowledge this with her talk of helping people get on the “housing ladder”.

    There is no housing crisis in Hong Kong, there is just a lack of good real estate investment opportunities.

  4. Big Al says:

    Lightbulb Moment! Convert all these shipping containers illegally stored on Heung Yee Crook land into housing units, thereby increasing housing stock without pissing off the NT mafia, who become even bigger landlords. Of course, with an internal floor area of around 320sqft, a 40ft container would need to be subdivided so as to be comparable with current non-container housing. And you could probably add a mezzanine floor, too, given the 7’6″ ceiling height. Who needs windows/ventilation/lighting/sanitation when you have all this space? That’s at least four Hong Kong families (or double the number of fresh Mainlanders). Why has no-one thought of this before?

  5. Warren says:

    What’s really weird is that you don’t mention the word capitalism once.

    This is capitalism. You love it and profit by it. Your whole life has been engaged in propping it up.

    Now shut up and live with your creation.

  6. Stephen says:

    @Peter Rachman,

    The great unwashed know full well that ‘Carrie’s Task Force’ will do nothing but kick the can down the road hence prices will continue to climb.

    Just because ex PCMP columnist, JvdK graphs don’t show it doesn’t make it not true that the ‘get my money out of China at all costs’ will continue to drive prices further north than the already ludicrous levels.

  7. Joe Blow says:

    Jake really left the Alibaba Morning Post ? The last bit of real journalism just left the building. Btw, did you know that Scott Adams, the creator of the Dilbert cartoon, is a big Trump fan ?

  8. Regina's O Face says:

    @Paul
    Indeed so. There are several design companies offering surprisingly innovative ISO container homes, and while it’s not the dream home we’re all supposed to lust after – particularly in HK/UK/US – if you’re young or have simple tastes a limited budget will get you a decent amount of space that’s all yours sooner than you think.
    As ever, though, to benefit fully from these designs you have to move to a civilised place that doesn’t artificially restrict land supply to pander to a developers’ cartel or – just as bad – NIMBYish property owners who see no relationship between the value of their own nest egg and their children’s inability to afford a home.

  9. Sojourner says:

    @Joe Blow

    Scott Adams is a fan of Trump’s persuasion skills, not his presidency, at least according to Wiki:

    “Adams officially announced his endorsement of Hillary Clinton in June 2016, stating that Clinton had paired “the idea of President Trump with nuclear disaster, racism, Hitler, the Holocaust, and whatever else makes you tremble in fear” and that he (Adams) would be “a top-ten assassination target” because he “wrote about his (Donald Trump’s) persuasion skills in positive terms.”

  10. LRE says:

    @Joe Blow
    According to a note in the Business section of today’s The Self-Censored Morning Post Jake is on holiday. Although it’s unclear whether or not it’s a re-educational holiday in the Chinese countryside or down a salt mine or something.

  11. Guest says:

    Never thought I’d say this: Tung Chee-hwa has been Hong Kong’s least worst CE so far. And this was with the Asian Financial Crisis and SARS plaguing his administration.

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