Written by: Wei Wan Ju (Reasons for High Housing Prices)
Anson Cheung (Housing Problems and Government Intervention)
Andy Yau (The future of Hong Kong Housing)
OverviewThere are currently 2.6 million residential units in Hong Kong, accommodating 2.35 million households.
- 730 000 households live in public rental housing (PRH)
- 380 000 in self-owned units acquired with government subsidies
In other words, almost half of the households in Hong Kong are benefiting from some form of housing subsidy by the Government. Of the 1.24 million households living in private properties, 870 000 are owner-occupants. Taken together, nearly 85% of households live in PRH units, subsidised home ownership scheme flats or their own private properties.
Reasons for High Housing Prices
1) The supply of land is lack
A decade before 1997, the Hong Kong Government land sales program all required by the Sino-British Land Commission to decide (after 1997 transferred by the SAR Government to decide). At that time, the Commission decided that for an annual can only supply up to 50 hectares of land as the land sales purposes. In that case of limited lands, the land prices raised up. At the same time the Government has been pursuing a high land price policy, lands would be sold to the highest bidder. The Government's 40% of income depends entirely on land sales, so the government was seeking more bid of each sale of land, especially residential land rising. This lead to the premium accounted for 60% of the housing costs even higher. To keep the profits, developers kept raising housing prices. Bring about that people's living quality did not rise while stable economic growth in Hong Kong.
2) The 6 ruling landlords stockpile the lands
The reserve lands of HK government are few. A newspaper did a survey conducted in July 2010 about the allocation of reserve land in Hong Kong. The result is that today the government owned the reserve land about 34.48 million cubic feet. However, the five largest real estate developers owned 46 million cubic feet, more than the government.
The developers stockpiled lands instead of developing, resulting in land soaring.
In the book” Land and the Ruling Class in Hong Kong” referred that, there is a Abolishment/Amendment of Letter A/B policy, which is a Beneficial policy for big developers holding massive undeveloped agricultural lands. The landlords hold the undeveloped agricultural lands instead of developing the lands. They are waiting for government to authorize the land use changing. And while they holding the lands, they won’t be levied taxes. This policy even helps the developers to stockpile the lands.
3) Increasing of population
After the Second World War, large number of HK people who went to Mainland China returned to Hong Kong. And the breaking out of the civil war forced more people to come into Hong Kong. After wars, Hong Kong's population rapidly increased. Nowadays , Mainland immigrant and Foreign migrant workers move to and settle in Hong Kong legal and illegal settlement of new immigrants, and migrants from the Mainland to Hong Kong. The raising of population make the housing demand much exceeds supply.
4) Real estate speculation from foreign capital
Speculators have been driving up property prices in Hong Kong. According to the Global Property Guide website, demands from mainland China alone constitutes one-fourth of housing market. The other buyers from foreign capital with the very low interest rates and strong capital make the increasing of housing price. The buying frenzy was fuelled by robust economic growth and the very low interest rates in the US.(2010) At first, official in government claimed that only the luxury housing will affect. But the fact is, all the housing prices have been affected.
Housing Problems in Hong Kong
1) Shortage of Housing Units
The overheating of the Hong Kong property market has left the private housing market severely unaffordable and the trend is expected to continue for the next 20 years, according to research carried out by the Royal Institution of Chartered Surveyors. The recently announced My Home Purchase Scheme aims to provide 1,000 housing units a year for the sandwich class populace of Hong Kong. Given the income and asset ceiling requirements of the My Home Purchase Scheme applicants, 35% of total households in Hong Kong are eligible for the Scheme, according to the 2006 Census results.
'So there will be a severe undersupply of these housing units, unless amendments are to be made regarding the income ceiling and/or the amount of housing units proffered, this scheme is not going to address the housing demand of all middle income people of Hong Kong,’ said KK Wong, Chairman of RICS Hong Kong.
2) High Land Rental
With 7 million people and a land area of 1,054 square kilometers, Hong Kong is one of the most densely populated areas in the world. To address land supply concerns, the government plans to speed up their delivery process (all land is owned by the government and leased out to developers) and to encourage the re-development of old industrial buildings.
3) Inadequate facilities / Poor Sanitation
A living unit’s physical condition, its safety, the level of crowding and the quality of the surrounding neighbourhood all contribute to “poor” housing conditions for people living there. Therefore, “Bedspace”, “Rooftop structures”, and “Temporary” in both the Housing Authority and the private housing are included in the study’s definition of poor housing because of their less than desirable physical conditions.
When a household shares with others living quarters subdivided into a “Room/Cubicle”, this could fall into the category of PH. However, for some households, this could be a matter of choice in some circumstances such as those single adults who want to move out of their parents’ home for some independence or to be closer to their place-of-work. These more affluent room renters should be segregated from the study’s target group and so the study has classified them as those with a per capita household income above $6,000, which is the SAR median. Using income as a deciding factor is prudent given that PH under most circumstances is due to poverty.
4) Overcrowding
Hong Kong is an extremely crowded metropolis, available lands in inner-city areas around the harbour for domestic or industrial uses had long been exhausted. In view of the situation, the government has gradually begun to give up the laissez-faire policy towards the use of land in the 1950s, planned layouts have been imposed on further urban development, large scale reclamations have been carried out, and new towns have been developed in the New Territories.
The population in certain older urban areas (e.g. Central, Sheung Wan, Tsim Sha Tsui, Yau Ma Tei, etc.) has slightly decreased; however, the problems of overconcentration of population in urban areas, housing deficiency, and lack of space for further development remain unsolved. In 1976, there were still 274,427 squatters in Hong Kong (Hong Kong, 1977). Public housing estates, which provide residence for nearly 2 million people in·1977, allow only a per capita living space of 35 square feet for their dwellers (in old
type Mark I and II resettlement estate, only 24 square feet). And new towns in Hong Kong are also all of considerable large size in terms of population, and high population density and high degree of overcrowding are being observed.
5) Old and Torn Buildings
The increasing number of decrepit buildings in such districts as Kowloon City, Hung Hom, To Kwa Wan, Ta Kok Tsui an Sham Shui Po has been a stark reminder of the growing divide in the development of Hong Kong. The crumbling of the tenement building has laid bare not just the widening gulf between the rich and the poor but a disjointed government whose capacity in resolving longstanding issues such as old buildings is falter.
6) Slums and Squatters
It’s a part of Hong Kong you can only see from above: rooftop slums home to tens of thousands of people. Unable to afford a regular apartment in Hong Kong’s extraordinarily expensive housing market and forced to wait years for a public housing unit, entire families live in illegal shacks on top of the city’s apartment blocks.
Two years ago, the Hoi On Building in Tai Kok Tsui near Mong Kok in Kowloon was home to more than 100 people living on rooftops, 10 stories above ground. Shacks lined passageways that mimicked the narrow lanes of rural Chinese villages. Some were crudely fashioned out of tin and wood, but many were sturdier, with brick and concrete walls, metal doors and air conditioning units in the windows. Common areas on the roof were filled with drying laundry, potted plants and container gardens.
Government Intervention
To discourage property speculation, the government has intervened decisively.
On 1 June 2010 the government implemented nine market-cooling measures, including: New guidelines for developers requiring full disclosure, and restricting overly aggressive advertisements including the use of “show flats”.
- Developers are required to announce house prices three days before selling any unit, and to disclose transactions involving company executives and their relatives.
The government raised the stamp duty for luxury homes and promised to increase land supply. It also ensured an increase in the supply of small and medium-sized flats by imposing conditions of future land sales. It held the first land auction of 2010 on Feb. 22.
In August 2010, the government pledged to sell more land to private property developers. It will also supply about 61,000 private housing units over the next 3 to 4 years.
The government will temporarily stop offering residency to foreign property buyers (the Capital Investment Entrant Scheme); instead, it plans to introduce a rent-to-buy program for first-time homebuyers.
It capped residential mortgages worth HK$12 million (US$1.55 million) or more at a 60% LTV ratio (the previous mortgage cap had a HK$20 million (US$2.58 million) threshold).
The Future of Hong Kong Housing
The Government aims to supply sufficient land for the private sector to build a mix of residential units, and provide public housing for low-income people who cannot afford private rental accommodation
When private housing is in short supply and property prices rise to a level beyond people's purchasing power, the Government will intervene and make adjustments through the provision of additional land and through subsidized housing policy.
1) Maintaining Public Rental Housing Production
The government has the target of supplying an average production of 15 000 PRH units a year. There are 2 ways to accomplish this target.
Firstly, to open up new sites and explore ways to appropriately increase the densities and plot ratios of PRH projects without compromising the living environment. Secondly, those prejudiced objection of some local communities to PRH development should be ignored.
These are measures to meet the target of maintaining an average waiting time of 3 years for General Waiting List applicants. Under no circumstances will this policy be changed in order to ensure social stability and harmony.
2) Private housing land supply
The government try to make available land for an average of 20 000 private residential flats each year in the next decade. It aims to build up a sufficiently large land reserve within a certain period to stabilize the supply of residential land. In order to increase the supply of small and medium flats, the government put up the first site with flat number and flat size stipulations last year. The government has already sold few sites with flat size restrictions, which will provide thousands of small and medium flats. This policy will continue in future.
3) New Policy for Resumption of Home Ownership Scheme
Its target families are whose household income exceeds the limits for PRH application but not be able to afford owning a private flat. Families with a monthly household income between $20,000 to $30,000, first-time home buyers could apply for the new HOS. Flats with a saleable floor area of 400 to 500 square feet will be offered at affordable prices that roughly be set in the range of $1.5 million to $2 million. It plans to provide more than 17 000 flats over 4 years from 2016-17 onwards, with an annual production of between 2 500 and 6 500 flats. Actual number of flats to be built or put up for sale each year will depend on demand at the time. The first batch of new HOS is expected to be ready for pre-sale in 2014 or 2015.
4) Policy on Land Development and Accumulation
The government tries to expand land resources of Hong Kong by identifying the following measures:
- To release industrial land for non-industrial uses, half of which will be made available for housing;
- To explore the option of reclamation on an appropriate scale outside Victoria Harbour.
- To actively explore the use of rock caverns to re-provision existing public facilities and release such sites for housing and other uses. E.g. the relocation of the Sha Tin Sewage Treatment Works
- To look into the use of green belt areas in the New Territories that are devegetated, deserted or formed and convert them into housing sites.
- To examine “Government, Institution or Community” sites to avoid the under-utilisation of sites long reserved but without specific development plans
- To explore the possibility of converting into housing land some 150 hectares of agricultural land in North District and Yuen Long
