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Jake's View
PUBLISHED : Sunday, 25 November, 2012, 12:00am
UPDATED : Sunday, 25 November, 2012, 2:06am

Posh property expensive? It's Hong Kong meting out justice

Global guides miss the complexity and economic redress lurking behind high real estate values

HK rises to top 3 on pricey cities list

SCMP Property, November 21

Let's talk about pricey property in Hong Kong. At the latest official count, 765,000 flats in this city have an average monthly rent of about HK$1,200 apiece. Pricey?

In fact, public housing tenants are effectively paid to occupy their homes. Management, maintenance and other costs amount to more than rental income. The Housing Authority incurs a loss on rental operations despite having no land costs. Nonetheless, it has granted its tenants rent-free periods of at least two months a year for the last five years.

Then we have another 324,000 flats in the Home Ownership Scheme, housing sold at about half of the prevailing price in the private sector at the time they were completed. I personally rate the newer HOS estates superior to neighbouring private sector housing. I own an HOS flat.

Private sector housing is a little pricier, of course, but on any international comparison the price of housing is determined largely by the disposable income that the occupants can generate within a reasonable commute from their homes.

Our low personal income taxes make this a high figure for Hong Kong. We may scream and shout about property prices but, at present interest rates, an average mortgage still absorbs less than half of average household income. Although the last full study on housing aspirations is now 13 years old, I recall that it showed a very high proportion of private sector flats held free of mortgage.

So what is all this about a pricey city when a third of our population lives in what may be the cheapest urban accommodation on this planet? What other economy has given home ownership to 15 per cent of its population at half the prevailing market price and is now preparing to raise that figure even higher?

Our headline, of course, referred only to the luxury end of the private sector. Nothing else was covered in a survey by Global Property Guide, an American property research website. I sometimes think these overtly expatriate studies should be published with a prominent disclaimer - "Caution, Hong Kong. This isn't you."

And it isn't. Luxury flats, defined as any flat of over 160 square metres in floor area, account for barely half of one per cent of the private sector housing stock.

What we have here is a message to American professionals whose employers are thinking of posting them overseas: if you want to live in the same sort of home you have now and have the same amenities available, this is what it will cost you in different cities around the world.

I have a message of my own to post to American companies. If you want a presence in Hong Kong why not hire people from Hong Kong for it? They will come a lot cheaper and be up to speed immediately.

There is also another way of looking at the high prices of luxury flats. The most pricey city on Global Property Guide's list is Monaco, a tax haven for anyone; not subject to double taxation agreements with France. Pssst..., wanna hide your money? No questions asked. Just buy an existing owner out. We're building nothing new.

Next comes London, the favourite refuge of Russian thugs who have pillaged their country's resources. It is no surprise that the classier districts of London are high-priced. And then comes Hong Kong, a favourite refuge of Chinese thugs who have money to hide.

But we know how to handle people like that here. We tell them that the property market is hot and will get even hotter as they can quite well see themselves. Someone just paid HK$70,000 a square foot for a flat in that twisty new block on upper Stubbs Road, hard cash, straightforward deal, no monkey business, cross my heart.

And they believe it . We then extract from them the hard cash they extracted from others.

There is natural justice in the world after all and the luxury end of our property market plays a crucial role in meting out this justice to those who deserve it.

jake.vanderkamp@scmp.com

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This article is now closed to comments

megafun
reckons his article is friction, as compare to factual news or a piece that is fair! having taken into consideraton of all known factors.
caractacus
What a fatuous article, or is it an advert promoting the property industry? Property prices in Hong Kong have nothing whatsoever to do with 'justice', but are exactly the opposite. Approximately half of public housing tenants own private flats and should not be eligible for public housing, so this is a form of benefit fraud. The 'mainland thugs' who park their money here have invariably smuggled cash over the border and laundered it in property, which is a serious criminal offence, conveniently too frequently overlooked by our property tycoon dominated economy and system of government. First time home buyers can't get a look in at current prices and which of them can find up to 50% cash deposit?
An average mortgage may absorb less than half of average household income, but presumably this includes cheaper Home Ownership Scheme properties with several earners living in them and excludes middle class families who want to live in something other than a 200 sq foot box. Conventional financial wisdom is that one should pay up to a maximum of 27% of one's income.
Given the generally poor quality of housing and scarce or overused surrounding public amenities plus the fact one cannot get a freehold title, by any honest, reasonable standards Hong Kong property is about the worst value for money in the world.
No doubt Jake's answer to all this is if the usual parochial Hong Kongers' retort: if you don't like it go somewhere else. He sounds exactly like Henry Tang.
honkiepanky
Let me see if I can follow the logic in this article. Ordinary people in Hong Kong shouldn't worry about the price of "luxury" (i.e. the size of an average bathroom in the West) properties. Why? Because they're too expensive!
Maybe starving folks in poor countries shouldn't worry about the price of food, since it's too expensive.
gkuhl
It's more than 160 m² (= 1600 ft²) for a luxury flat, which also in a western city would be very expensive.
honkiepanky
I'm not sure where you're from, but in most U.S. cities at least, 1600 sq ft is well within the reach of middle class families -- if not in the city center, then in nearby suburbs.
Regardless of whether you call it "luxury" housing or not, the fact is that most of the private housing stock is way out of reach for most of the population in HK.
mymak
You can't really compare the two places. They have different land availability and demand for said land. When I was a boy I lived in Australia. My family were ordianary working class - we had a detached house with a hill. Since then they have built six detached houses on what was once our property. At 12 I moved to the UK and was shocked to be living in such a small house - semi-detached - downstairs living room, dining room, kitchen, upstairs two bedrooms, a box room and bathroom.Then when I married I moved to Hong Kong- 5 people 600 square foot. I'd love to live in a huge house but accept that if I want to then I need to go and live in somewhere like the US or invent a time machine.
honkiepanky
I agree and was not suggesting that Hong Kong housing can be as cheap as in the U.S. My point was that some perspective is required when speaking of "luxury" or "posh" flats in this city, which are often not all that large or impressive from any but the most parochial standard.
 
 
 
 
 

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