In almost every discussion of what ails Hong Kong, housing rents and property prices turn up as the number one concern. Yet Hong Kong is not alone in this problem.
A recent cover story in The Economist (April 4-10 issue) entitled “Space and the city” testified to the growing recognition among economists that high property prices and housing rents are a universal problem in all economically successful cities in the world.
There are two simple reasons for this: fast-growing demand and slow-growing supply.
The fast-growing demand was caused by the forces underlying globalization. Economic recovery and population growth after World War II increased housing demand in many large cities around the world. Then in the 1980s, the advances in information technology sparked a boom in idea industries, attracted workers to cities that had these industries, and thereby pushed up demand for property and housing.
Land in these cities – ranging from old metropolitan areas like New York and London to new places like Austin and Bangalore – became scarce. Hong Kong also attracted knowledge workers from all over the world as China opened up and reformed its economy.
But in the face of rapid growth in demand, these great cities responded by slowing down supply through regulation.