Why prices of Hong Kong homes will keep rising until sales are restricted to locals only

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Public and private housing blocks in Ngau Tau Kok in May. Hong Kong is considering imposing a vacancy tax to curb rising property prices. Photo: Fung Chang

Published: 10:16am, 27 Jun 2018Updated: 12:31pm, 15 Oct 2020

I refer to the letter from Patrick Mak (“Reclamation and protectionism can both be used to solve Hong Kong's housing shortage”, June 24), commenting on Timothy Cooper’s letter (“Hong Kong’s housing crisis has a quick solution: reclamation for the Eastern Lantau Metropolis”, June 19) and Michael Chugani’s column (“How Hong Kong’s housing crisis can be solved by thinking like Donald Trump”, June 13).

Home prices are determined by a combination of supply, demand, liquidity and expectation. Hong Kong’s former chief executive Leung Chun-ying put forward a suite of stamp duties on home purchase as “demand management” measures. The fact that home prices across the board keep breaking records shows clearly that such measures have failed.

I agree with Michael Chugani and Patrick Mak that restricting home purchase and resale of residential properties to permanent residents only is the most effective way to curb demand, pending the production of sufficient supply to redress the current imbalance.

As Mr Mak pointed out, cities in mainland China have already introduced such measures to ensure that priority is given to locals. Restrictions on home purchase, limiting sales to permanent residents exclusively, will not only demonstrate the government’s determination to look after locals first, but also curb market expectations that home prices can only go up.

Although the government insists that currently non-permanent residents and corporations account for no more than around 10 per cent of total transactions, the demand from wealthy people from the mainland will continue to be strong, as Hong Kong remains the most attractive city to live in for this group.