Record land sale a worrying signal
With mainland developers willing to pay sky-high prices at auction and tender, it is Hongkongers who are feeling the housing squeeze
It seems scarcely believable that the average Hong Kong family now needs the equivalent of nearly two decades of income to buy a typical small flat, and is likely to need more soon, with the boost to price expectations from a record residential land sale last week. Two mainland developers paid a record HK$16.86 billion for a plot at Ap Lei Chau. The sale has firmed up predictions of a 10-20 per cent rise in residential prices this year. This partly reflects the government’s high-land-price policy, not to mention its hoarding of the windfall – HK$60 billion above expectations this fiscal year – for infrastructure projects that do nothing to close a worrying wealth gap. It is also an example of Hong Kong real estate, with its protection of property rights and a limited supply of new land, being a haven for capital outflow from the mainland and a currency hedge.
As a result of the distortion of the market by such factors, developers are building ever-smaller flats and selling them to first-time local buyers who think ownership of a home is more important than the size. In an ageing city like Hong Kong, this cannot be good for society. It comes back as always to land supply and the serious shortage to meet housing demand. The government needs to overcome its hesitancy to set some conditions for land sales that limit the incentive to developers to build tiny flats. Reluctance to interfere in the market is understandable. But the record sale at Ap Lei Chau, and the implications for affordability and liveability should spur serious reflection. At the same time, the government must not let up on its strenuous efforts to find more land for public housing.
Public housing output is still falling short of targets set for the coming years, contributing an overall shortage and a price spiral that does not deter mainland buyers. The Ap Lei Chau sale also strengthens the argument for careful consideration of the limited release of less ecologically sensitive country park land for subsidised housing and residential facilities for the elderly.
This would help reduce the waiting list and take some heat out of a market for private flats in which the number in the pipeline is on target, while the waiting list for public housing has blown out 50 per cent from the three-year target to four-and-a-half years.