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High house prices are a bigger problem than a lack of democracy

Recent studies have found that 60 per cent to 90 per cent of new property developments have been snapped up by investors instead of real-end users.

Recent studies have found that 60 per cent to 90 per cent of new property developments have been snapped up by investors instead of real-end users.

This alarming trend will persist as the government is unable to sufficiently slow demand using higher stamp duties and taxes. Property developers are able to subsidise buyers from their excessive profits, offsetting these charges.

As long as there's more money and liquidity from local or foreign investors (or speculators) flowing into property than public or private housing being built, Hong Kong's housing problems can never be solved and will only get worse.

Another worrying trend is the construction of micro flats. For example, an initial plan to build a 2,000 sq ft flat has been modified into 10 units of 200 sq ft, pending approval. Developers and speculators know that many in the city are desperate and can't afford larger units, and are forced to rent or buy these tiny flats at higher prices per square foot than larger flats.

Since supply can't meet demand, shrinking flat sizes to increase numbers is comparable to a country that can't feed its citizens making everyone eat less to feed more mouths.

Having the reputation of being one of the world's freest economies is pointless if future generations are destined to be housed in small cubicles and become mortgage and rent slaves.

With a median home price 15 times the annual median household income, Hong Kong is ranked as the most unaffordable place for housing in the world by Demographia; and perhaps the best place for developers and speculators to profit from its people.

Another common excuse given is that the dollar peg and quantitative easing by the Federal Reserve, resulting in low interest rates, inflates property prices in Hong Kong. One doesn't have to look too far north to see that property prices in China's coastal cities such as Shanghai and Beijing have also risen substantially without the peg.

However, despite rapid urbanisation and its huge population, China still manages a 90 per cent home ownership rate against Hong Kong's 50 per cent.

Young people in Hong Kong are becoming increasingly frustrated, and many are involved in the Occupy Central movement. Many of them will have to face the reality of being part of a "homeless generation" where housing becomes unaffordable.

The absence of democracy in Hong Kong is not the fault of the city's adults, but unaffordable housing is.

This article appeared in the South China Morning Post print edition as: High house prices are a bigger problem than a lack of democracy
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