Supply shortage means home is where the hardship is for Hong Kong

Our property prices are now the most expensive in the world. The average floor area of new flats keeps shrinking. Due to fears of property prices outstripping earnings, the masses have scrambled to buy flats, with the consequence of further driving up home prices.

PUBLISHED : Saturday, 04 August, 2018, 6:08pm
UPDATED : Saturday, 04 August, 2018, 6:56pm

Our property prices are now the most expensive in the world. The average floor area of new flats keeps shrinking. Due to fears of property prices outstripping earnings, the masses have scrambled to buy flats, with the consequence of further driving up home prices.

Contrary to conventional thinking, I encourage young people to buy homes as soon as their financial situation permits, as a hedge against the future. It is a worldwide phenomenon that property prices stay high in major cities where jobs are plentiful and the market is thriving. If Hong Kong’s economy continues to grow in the context of the “Greater Bay Area”, demand for housing should continue to increase as more people invest, live and work in the city.

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Admittedly, affluent children fare better. Their parents can either bequeath their home to them or finance their home buying. However not every young person has this privilege. Perhaps they can consider pooling money to invest in a flat, disposing it when the time is right to secure enough money for a down payment of their own.

The current situation favours investing in the property market. Interest rates remain relatively low worldwide. There is a lack of solid and profitable alternative investment options other than real estate in Hong Kong, and the global economic and political situation is unstable. Above all, supply of flats lags demand because of acute land shortage.

To help the underprivileged, we must take a two-pronged approach, addressing the supply and demand sides of the housing sector. Tackling one side without addressing the other is doomed to fail to restore the residential market’s sanity.

Nobody will dispute that land shortage is the primary cause of our housing crunch. There is no lack of suggestions on how to increase land supply, but cost, execution time, public reaction and viability are challenges.

This is why the government-designated Task Force on Land Supply is launching a five-month consultation to reach a consensus on which of 18 options should go ahead first – including controversial choices such as the consolidation or relocation of recreational sites such as Fanling Golf Course; reclamation projects outside Victoria Harbour such as East Lantau Metropolis; and developing land on country-park fringes.

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It has been contended that East Lantau Metropolis or any other land reclamation should not be pursued because it will take a long time, the lives of Chinese white dolphins will be threatened, and Hong Kong’s population growth rate is forecast to decline.

But even if the city’s population drops to 7.7 million in 2066 after peaking at 8.22 million in 2043, as predicted by our Census and Statistics Department, the extra reclaimed land will not be wasted. Not only can people enjoy more space and live in larger flats, the land can ensure Hong Kong has an adequate supply of land to build cultural and recreational facilities as well as venues and offices to drive our economic growth.

If it takes a long time to complete any massive land reclamation project, shouldn’t we accept ones of a smaller scale outside Victoria Harbour? Any reclaimed land helps towards increasing our land supply, no matter how small.

But addressing land-supply problems is just a part of the equation, as demand – especially speculative demand – needs to be managed. Since 2010, different administrations have introduced various stamp duties to curb speculation, though they are still not quite effective in cooling housing prices.

More direct help should be offered to less well-off residents, including professionals and middle-class families who are not eligible for subsidised housing but still cannot afford homes.

Home prices are foreseen to stay high in the near future. Only by substantially increasing the supply of land and residential flats can Hong Kong’s home prices be controlled, without introducing punitive measures that could further distort the market.

Dr Eugene Kin-keung Chan is president of the Association of Hong Kong Professionals