Property purchasing power of Hong Kong’s university graduates only a quarter of those 30 years ago, thanks to high home prices
- Researchers say speed at which home prices have outpaced salaries of young people is ‘terrifying’
- Problem stunts development of various industries, particularly innovation and technology sector, which in turn makes it harder for wages to catch up
Hong Kong’s property prices have ballooned so much that university graduates’ purchasing power for homes is only a quarter of that of young people 30 years ago, a study has found.
“The increase in property prices has outpaced the growth of young workers’ salaries by so much that it is terrifying,” said Cliff Tang Wing-chun, convenor of public policy group New Youth Forum, which conducted the study with another policy group New Forum.
Based on publicly available government data, researchers adjusted the monthly incomes of university graduates aged between 20 and 24, taking into consideration private property price inflation from 1987 to 2017.
The resulting figures reflected the real value of incomes in terms of property purchasing power, revealing a worrying trend.
Researchers found that the age group only had a median real income – under the calculating mechanism of the study – of HK$4,492 a month in 2017, the lowest in the three decades, as compared with HK$17,490 in 1987, the highest in the period.
Noting that university graduates back in 1987 were mostly high-income elites, while degrees are relatively easier to acquire today, researchers also compared the top 10 per cent of earners from both periods and found similar results.
In 1987, this group had a real income of HK$30,418 a month, while the figure dropped to HK$7,487 in 2017, after adjustments for property price inflations.
The study also compared the income situations of university graduates aged between 30 and 34. In 1987, median real income in terms of property purchasing power of this group was HK$21,126. This figure peaked in 2002 at HK$35,765 – during the last property market crash – and plunged to HK$8,625 in 2017.
Tang said the findings showed that private property prices had far outgrown salaries for young people, and homes were much less affordable than three decades ago.
He pointed out that high property prices had stunted the development of a variety of industries, especially the innovation and technology sector, which further prevented salaries from catching up.
“Some older, successful people like to say that young people today cannot make it because they are not as hardworking, but the study shows that young people today are facing a very different level of difficulty,” Tang said.
Some older, successful people like to say that young people today cannot make it because they are not as hardworking
Economist Andy Kwan Cheuk-chiu, director of the ACE Centre for Business and Economic Research, said the findings reflected that the property market was “in a serious bubble”, where those who did not own any property, like many young people, could not share the benefit of asset value increases, even if they had higher education and better jobs.
“Even the elite find it difficult to move upwards with today’s property prices,” Kwan said. “This is not normal and not sustainable.”
He said the only way out of the conundrum would be “to wait for the bubble to burst, or else salaries will never catch up”.
Tang urged the government to build more publicly-subsidised affordable housing and devote a bigger share of this to young singles than the current 10 to 20 per cent.
“The government needs to answer to young people’s wishes to form families and further their careers,” he said. “It can’t just push them into the private market.”
He added that the government should encourage the development of a spectrum of industries.
