Pay day in Hong Kong actually means you are paid
Nonsense survey from Demographia about affordability seriously flawed
Hong Kong has kept its ranking as the world’s least affordable urban centre to buy a home for the seventh year running, in a survey that ... blah, blah, blah...
- SCMP, January 24
Yes, blah, blah, blah, I call it. I think this International Housing Affordability Survey by Demographia, an American think tank headed by a man who favours cars over trains (imagine it in Hong Kong), has some serious holes in its assessment of housing affordability here.
The survey is based on comparing household median income to median home prices and I have trouble with both sides of this equation.
For starters, how does anyone determine median income in Hong Kong? It’s relatively easy in countries with extensive tax regimes that cover all forms of income and thus require that extensive records be kept.
But the income tax in Hong Kong is only a salaries tax and this at a low standard rate of 15 per cent with a host of permissible deductions that allow most people to pay no tax at all. There is no dividend tax, no interest income tax, no capital gains tax, no sales tax and I’ll soon run out of breath if I go on listing all the taxes we don’t pay and other unfortunates do.
So how can our statistics people determine household median income is if no-one is required to declare it?
Answer: They just take the data from salaries and wages and ignore all the rest.
But that’s a big mistake in an entrepreneurial society like this, where a disproportionately large number of people operate their own businesses and pay themselves through untaxed channels. I strongly suspect that Demographia’s income figures for Hong Kong are much too low.
I also saw little sign in the 73-page survey report of a proper distinction between pre-tax and after tax income. My apologies to the authors if they made it, and I missed it, but my eyes glazed over occasionally after wading through the report’s saccharine introduction.
What I have in mind here is my joy on getting my first paycheque in Hong Kong and seeing that I had received every cent of my promised pay. My contrary experience in Vancouver was receiving only half of it after compulsory (over) deduction for income tax, unemployment insurance, provincial medical plan, union dues, workers’ compensation board premium and I will truly run out of breath this time if I continue.
Oh yes, I forget. That was just on the income side. When I spent the money I got hit with a 17 per cent sales tax.
My point is that pay day in Hong Kong means you are paid. Elsewhere it means hold-up time with government sticky fingers reaching in from around the compass both before and after pay date. It makes quite a difference to household median income. Once again I suspect Demographia’s Hong Kong figures are too low on any internationally consistent basis.
And then we get to this matter of the median home price. The fact is that 35 per cent of our housing stock consists of public housing rental units for which the average rent last year was HK$1,526 a month, an ultra-low accommodation cost for any comparable city across the world. Another 15 per cent is public sale stock made available to qualifying applicants at a huge discount.
Private housing, which is all the survey could measure, accounts for only half of our total. What the survey calls the median home price is thus actually the top quartile for Hong Kong. Once again, way off the mark.
And think once more of the irony of calling Hong Kong housing the most expensive on earth when more than a third of our stock is probably the lowest cost housing that the survey covers.
Vancouver also gets a costly rating, by the way, with homes prices calculated at 11.8 times median income against 18.1 times for Hong Kong. My guess is that these ratios should be reversed.
What is protest in Hong Kong at high home prices is outright screaming from friends and relatives in Vancouver and outlying districts. They don’t have the public housing, the non-declarable income and the low taxes. They’re hurting much more than Hong Kong people are.