High property prices weaken competitiveness
A little perspective can be sobering. Take Hong Kong's property market, for example. We all know property here is expensive, but precisely how it compares with major cities elsewhere is not easy to gauge. Now, an international survey has brought some clarity, revealing our housing to be the most unaffordable and increasingly so. This is a good time to consider the dominant role played by the property market in our city's economy. The high cost of property affects us all in many aspects of our lives and poses a long-term threat to Hong Kong's global competitiveness.
A comparison by a US consultancy at the request of this newspaper showed Hong Kong people pay more than 10 times their annual income to buy a flat. This was the highest of the 272 cities looked at, earning a 'severely unaffordable' rating along with London, New York and Sydney. We shouldn't be surprised: Property is an all-consuming subject for Hong Kong people.
Those who already own it constantly talk about valuations, while people without the means to buy complain high prices make home-ownership unaffordable. The government has come under pressure to curb property price rises. It has, sensibly, reacted with caution, wary of causing the market to crash. But the Hong Kong obsession with the property market undermines our city's competitiveness in various ways. Bright young people opt to make their money through investing in property rather than directing their energies into other, more innovative, pursuits. Similarly, much of the spare cash in our city is soaked up by the property market, instead of being put to other, more productive, uses. Then there is the impact high property prices have on the cost of goods and services. Companies pay high rents and this is passed on to the consumer. We know this only too well each time we shop in a supermarket, buy a meal in a restaurant or pay for a new pair of shoes. In this way, the land premiums charged by the government filter through to all, offsetting the benefits of our city's low tax regime.
A healthy property market is key to Hong Kong's success. But we should not forget that high property prices make it more difficult to attract talent and investment, undermine our competitiveness as a port and as a provider of services to the mainland. If our competitiveness suffers, ultimately our property market will too. We have to stop living for today, and focus more on the future.