Posh property expensive? It's Hong Kong meting out justice
Global guides miss the complexity and economic redress lurking behind high real estate values
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.
