Hong Kong housing policy should focus on those living in the poorest conditions
Regina Ip says given our sky-high property prices and the critical lack of land supply, the government is in no position to try to build a housing ladder. Instead, it must focus on helping those with the greatest need
Last year, many in Hong Kong had good reason to pop the champagne corks. The Hang Seng Index outperformed all Asian markets and rose 35 per cent. The housing market registered similar robust growth, with home prices up 20 per cent year on year, according to the Centa-City Index. Housing units across all segments, from luxury homes to “nano” flats, were sold at record, jaw-dropping prices. Sales of private housing units reached a record HK$280 billion, according to Centaline.
At such stratospheric levels, even some developers joined exasperated prospective homebuyers in expressing concerns about the sustainability of such prices, and the financial risks borne by developers who provided additional mortgage to buyers. With a continuing shortage of land and public housing units, the government seems helpless in tackling the twin problems of housing shortages and the concomitant bubble.
To formulate truly effective policy responses to address the impasse, the government, and the public, must get to the root of the problem.
Skyrocketing property prices in Hong Kong are a direct consequence of the excess liquidity produced by central banks to save the global economy after the subprime-induced financial tsunami a decade ago. There has been a massive inflow of capital since the fourth quarter of 2007. Since then, it is estimated that Hong Kong has received a net inflow of more than HK$1 trillion, fuelling the ballooning of domestic asset prices across different classes, from residential homes, shops, office and industrial units, and car park spaces, to taxi licences and cryptocurrencies. With too much money chasing too little supply of residential units, the continuous surge of home prices seems inevitable.
Watch: Explaining Hong Kong’s housing crisis
On the supply side, the government’s hands are tied by the fact that, in contrast to private developers, it has no land bank. In the present-day political climate, it takes much longer than in the “good old days” of high-speed, unchecked growth to produce land or to build new development areas. Government officials have conceded that they may fall short in meeting the 10-year target of producing 280,000 public and subsidised housing units by 2027-28. The average waiting time for public housing applicants has lengthened to 4.6 years, and the soonest a substantial quantity of public housing units – 200,000 – can reach the market, in stages, will be 2023.
In view of the difficulty it has encountered in speeding up its public rental housing programme, the government has resorted to encouraging the release of public rental housing units by stepping up enforcement of the “well-off tenants policies”, implementation of the “green form scheme” (a scheme for selling public housing to sitting tenants and those eligible for public rental housing); and expanding sales of subsidised units to low-income applicants by waiving the premium payment.
Critics point out that encouraging sales of subsidised housing units to well-off rental housing tenants amounts to creating greater injustice by providing double subsidies to these tenants. Moreover, converting housing units earmarked for renting into subsidised sale flats would further lengthen the average waiting time for public rental housing applicants, and make it harder for those on the lowest tier of the housing ladder to move into better accommodation.
Against the background of soaring home prices and increasing risks of a bursting of the housing bubble, it is unwise of the government to encourage home ownership, and push public housing tenants into the private market.
The government has a duty to ensure that each and every one of its citizenry live in decent conditions. But this does not have to be achieved by encouraging home ownership, especially at a time when home prices are sky high. The government’s priority should lie in improving the lot of those who live in abject conditions, such as those in subdivided cubicles or rooftop squatters.
Watch: The challenges of living in a subdivided flat
The government’s declared objective of helping young people or those with household income in the top 20 per cent bracket to buy homes is misguided. There is no reason subsidised homes should be provided to young people who do not have steady incomes and who may not be able to afford higher mortgage payments as interest rates go up. The government’s priority must lie in helping those with the greatest need.
The government’s “vision” of building a housing ladder by inserting a new category of “starter homes” for those in higher income brackets than those currently eligible for home ownership schemes is a fantasy. With little supply of “spade-ready” land on its hands, the government has to look to developers with massive land reserves for help. The government would face severe political risks if it is seen to be “colluding” with developers, or bamboozled by wily developers into making deals that end up further fattening developers and weakening the government’s bargaining power.
The government should go back to basics: help those with the greatest need first, and build more public rental housing and subsidised homes for the poorest. It needs to increase its share of the housing market and become a stronger player, like the Singaporean government, before it can talk about building a housing ladder.
Regina Ip Lau Suk-yee is a lawmaker and chairwoman of the New People’s Party