Hong Kong's Quality of Life Index dips as home prices soar

Annual survey finds widest-ever gap between cost of flats and average incomes amid mixed messages in press freedom indices

PUBLISHED : Friday, 27 September, 2013, 12:00am
UPDATED : Friday, 27 September, 2013, 6:25am

Hong Kong homes are the least affordable they have been in the past 10 years, according to the latest figures showing that private household income failed to catch up with soaring home price growth - and the trend is set to continue.

Chinese University's annual Hong Kong Quality of Life Index puts last year's housing affordability index at 12.76 - the highest since the first study in 2002, when it stood at 4.7.

That means a four-member family now has to spend nearly 13 times their annual income to buy a 400 square foot flat in an urban area.

"This is the worst-ever result we have found," said Ng Sai-leung, director of the university's Centre for Quality of Life. "Housing affordability in Hong Kong is far from realistic. It is almost impossible for ordinary people to purchase a flat."

The centre's index reading was calculated using official figures that show a 400 sq ft flat in an urban area costs an average of HK$3 million, with a typical family paying around HK$21,000 a month for nearly 13 years to buy such a flat.

Chong Tai-leung, an associate professor of economics at the university, said a housing affordability index should not rise beyond five - meaning that families should not have to spend more than five years of their total earnings to buy a flat.

"Let's say a family saves about one-third of their monthly income to buy a flat - it will take at least 30 years for them to reach that amount," he said.

Chong expects quality of life in the city to get even worse this year as there are no signs of improvement in the two areas that were the biggest drag on last year's score - the cost of renting or buying a home.

And his assessment was confirmed by the Hong Kong Monetary Authority's latest Half-Yearly Monetary and Financial Stability Report, which estimated that the price-to-median-income ratio for typical householders in a 500 sq ft flat climbed to 14.7 in the middle of this year, just above the peak reached in 1997.

"As growth in private household income failed to catch up with housing price growth, housing affordability has continued to deteriorate," the report said.

Chinese University's report also shows that people believe freedom of the press is diminishing, which helped drag the general quality of life score down to 102.97 - its third-worst reading behind 2009 and 2011.

The baseline reading from 2002, when the survey began, is 100.

In decline since 2005, the press freedom index sunk to another low of 4.79, almost back to its 2002 baseline of 4.76.

But Ng said that belief may be misleading, as another indicator - the press criticism index - suggests there has been an improvement in press freedom, rising from 4.11 in 2011 to 4.23 last year.

Its 2002 baseline is also 4.76.

"The press freedom index is basically people's opinions from surveys, [but] the press criticism index is an objective count of media reports and commentaries, and the more criticism we hear, the more press freedom we enjoy in the city," he said.

The impression of declining press freedom may be related to incidents such as a reporter being detained by police after asking former president Hu Jintao a question about June 4 during his visit to Hong Kong on July 1 last year, Ng said.

The Quality of Life Index consists of 21 indicators, with social factors weighted heaviest as there are 10, seven economic indicators and four environmental factors.