No instant solution to Hong Kong's housing problems, no matter how hard we wish
Bernard Chan says choices in the city are constrained by past decisions
There is a concept among academics and others called "path dependence". The idea is that decisions made in the past - which brought us to where we are today - limit the choices we currently have.
Housing is a good example. In the 1950s, Singapore and Hong Kong both faced rapidly rising populations with inadequate housing. Both cities wanted to replace squatter areas and slums with modern mass housing. Put briefly, they went about it in quite different ways.
The results are clear to anyone who compares the two cities now. Today, over 80 per cent of Singaporeans live in fairly spacious public-sector apartments that are affordable to them.
You will find complaints about rising home prices in Singapore, but many Hong Kong residents would look on in envy. Not only are our flats mostly smaller, fewer than half of Hong Kong residents get subsidised housing. Of the rest, those who bought in the past are sitting on good gains in property values. But because of significant price rises, the rest - notably the young - are locked out of affordable housing.
How nice it would be if Hong Kong could push a button and suddenly have a Singapore-style housing system.
Of course, some would argue that there are drawbacks to the Singapore approach. The Singapore government uses housing policy to encourage singles to marry and discourage ethnic minorities from clustering together. Would Hong Kong people put up with that? But let's focus on housing costs.
We cannot push a button. That is what path dependence means. Common sense tells us that we cannot suddenly make 80 per cent of our housing public-sector and/or affordable.
Hong Kong's median housing price is 17 times median household income, according to the respected Demographia survey. This is the highest affordability ratio ever recorded, according to Demographia, which considers a ratio of 3.0 and below as affordable, and sees Australia's ratio of 6.4 as a worry. Our problem is not unique, but Hong Kong's case is extreme.
To make the comparison fairer, we need to allow for the fact that a large proportion of Hong Kong's lower-earning families are in subsidised homes, and our middle class face lower taxes than in other developed economies. Even so, we can assume that Hong Kong's private housing prices right now are seriously out of balance with what mainstream middle-class families can afford.
This translates into a lower quality of life for many in private-sector accommodation: they have less money left over for non-housing expenditure, which affects other parts of the economy. The young are forced to live with parents or to have a home too small to start a family in. When they hear of developers building micro-units of less than 200 square feet, it is no surprise that frustration turns to anger.
Past policies and external factors like interest rates brought us here. To complicate things, we also face opposition to lower housing prices - from activists against development, and from existing property owners who see homes as an investment.
No instant solution exists. In the long term, a bigger supply of public rental units and subsidised homeownership may be necessary. If we are bold, we can reconsider reclamation, changes in land use - or even ask how to make cross-border living easier and better.
Meanwhile, our choices are limited. But that does not mean the situation is hopeless. When Financial Secretary John Tsang Chun-wah recently advised people not to buy a home if they can't afford it, he was criticised. But he was right. If HK$10,000 a square foot for a basic New Territories unit is beyond your means, don't buy. Interest rates will strengthen. China is slowing. More supply is on the way. And experience shows us that Hong Kong property prices can go down as well as up.
