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.