A house is not a home until it becomes affordable | South China Morning Post
  • Thu
  • Mar 5, 2015
  • Updated: 2:33pm
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 Managing Editor for SCMP.com International Edition and Mr. Shangkong Columnist. George has covered China's political and economic changes since 2002. George is the author of two books: This is Hong Kong I Know (2014) and Foreign Banks in China (2011). George has been named a 2014 Yale World Fellow. 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

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