• Fri
  • Oct 31, 2014
  • Updated: 8:15pm
Mr. Shangkong
PUBLISHED : Monday, 04 March, 2013, 12:00am
UPDATED : Monday, 04 March, 2013, 9:02am

A house is not a home until it becomes affordable

Rather than blaming developers, non-local buyers and the US Fed for high property prices, government should focus on how to make HK people rich

BIO

George Chen is the financial editor and columnist at the South China Morning Post. George has covered China's financial industry and economic reforms since 2002. George is the author of Foreign Banks in China. He muses about the interplay between Shanghai and Hong Kong in Mr. Shangkong columns every Monday in print and online. Follow George on Twitter: @george_chen
 

Property prices are one of the hottest topics in Hong Kong these days. Everyone seems to have a strong opinion, although many have lost sight of the real issue.

There is nothing wrong with the real estate industry growing in an international city like Hong Kong. And there should also be nothing wrong with the level of property prices - whether in the current uptrend or in the downtrend during the Asian financial crisis.

Hong Kong has been proud of being a free market for generations, and that is one of the things that makes the city different from the rest of China.

People make their own decisions whether to buy or sell. There are profit-takers, and there are also risk-takers.

If every detail must come under the government's control, that is a recipe for a planned economy.

There is something wrong with the way the question about property prices in Hong Kong is asked. It's always: "Are they too high?"

The real question most of us miss is how the government can ensure people can better afford to buy property.

Public housing is one way to allow more ordinary people, in particular those with low incomes, to obtain their first homes. For other people, the property problem the Hong Kong government is facing is no different from that elsewhere.

It is, in fact, a problem of employment and economic growth: how much money do you need to earn to be able to afford to buy your first home at a given price level?

That is the issue underlying the question whether the city's property prices are cheap or expensive. How cheap is cheap? And how expensive is expensive? A hundred people will give 100 different answers.

I grew up in Shanghai. When Starbucks and Pizza Hut first opened their shops in Shanghai more than a decade ago, I was studying at university.

A cup of Starbucks latte cost something like 10 yuan, a luxury for students at that time. Many young Shanghainese would take their boyfriends and girlfriends on dates to Pizza Hut, which was considered a decent restaurant about 10 years ago rather than just another fast-food place.

Today, the same cup of Starbucks latte costs about 30 yuan (HK$37.30) and it is no longer a luxury but a daily necessity for some students.

How much has Starbucks raised the price of its coffee over the past decade? About threefold.

How much have Hong Kong's property prices gained since 1997, when they last peaked? Of course, coffee and real estate are two very different things, but few people would try to politicise the coffee price by blaming mainlanders in part for buying too much - nor would the government attempt to do so.

People on the mainland can certainly afford to buy a great deal more today than they could a decade ago, thanks to their increasing incomes, which are catching up rapidly with Hong Kong levels.

Rather than blaming developers, non-local buyers and the money-printing US Federal Reserve for high property prices, the Hong Kong government should focus on how to make Hongkongers rich in the big wave of global economic rebalancing over the next few decades.

george.chen@scmp.com

 

George Chen is the Post's financial services editor. Mr. Shangkong appears every Monday in the print version of the SCMP. Like it? Visit facebook.com/mrshangkong

Share

For unlimited access to:

SCMP.com SCMP Tablet Edition SCMP Mobile Edition 10-year news archive
 
 

 

3

This article is now closed to comments

johnyuan
Allow me, George, to update you. Pizza Hut is no longer Pizza Hut of more than a decade ago in China. For years one eats pizza with fork and knife (first seen in Hong Kong in 1997). Otherwise Pizza Hut was a humble finger-food joint from USA. But the last upgrade in China that I witnessed took place just two months ago. Pizza Hut now has a wine list. I saw two local college-aged ladies each had a long stem glass filled with the red. It was at lunch time on a Sunday. The waiting line as usual was long.
By the way not all societies have their citizens so crazy about owning property. For young folks particularly restrained by their earning power in their beginning of their career just rent. So rental should be affordable too – and not all housings once are affordable, buy or rent are necessary a home. That is philosophically speaking. But I think we must be careful to examine what affordable means. If rent or mortgage EATS up too much leaving you broke from DINNING out at Pizza Hut or the like, life will become a drag. May be housing slavery by one’s own choice has taken place.
gkuhl
How does public housing for low income households and free market fits together? If you have an income, you should also be able to afford a place for living without the need of government subsidy. As this is not the case, Hong Kong's property prices are either to high or salaries are to low.
Maybe this is a call for an increase of the minimum wage? Assuming a cheap flat for a family of three for 5000 HKD per month which is using one third of its income for rent. If both work full-time (80 hours per week), we get a minimum wage of 43 HKD.
pgrath1
"....Hong Kong has been proud of being a free market for generations, and that is one of the things that makes the city different from the rest of China....."
Unless it involves milk-powder! HA HA HA HA HA
 
 
 
 
 

Login

SCMP.com Account

or