New mindsets needed to cope with the challenges
The Report on the Work of the Fourth-term Government of the Hong Kong Special Administrative Region, published in June, has not only given a detailed account of past achievements but, more importantly, set the tone for the new administration by identifying the unfinished work that needs to be done and outstanding issues that need to be addressed.
Most obvious of these is housing. The past administration distinguished itself by making affordable housing its primary objective for obvious reasons. To achieve that objective, it had spared no effort and resources in increasing the supply of homes by making available large tracts of land for development by both the public and private sectors.
These efforts have produced impressive results, according to the report. Data provided in the report show that the projected supply of residential properties in the coming three to four years stood at about 96,000 units — up 48 percent from the estimate made five years ago. What’s more, various measures were introduced to combat speculation, discourage overseas buyers and curb investment demand.
Resumption of the Home Ownership Scheme had resulted in the sale of nearly 5,000 units to the so-called “sandwich” class homes buyers who couldn’t afford homes at market prices, while their incomes were too high to qualify for government-built low cost housing.
Despite all these efforts, housing prices have continued to rise. Latest government figures show that average homes prices soared to a new record high in June with the widely followed monthly price index climbing 2.6 percent from May. Obviously, something more needs to be done to achieve the lofty goal of making housing “affordable” to more Hong Kong people.
Addressing the problem from the supply side makes eminent economic sense. But circumstances have proved that a massive increase in supply would be needed to make a dent on prices, which have been supported by almost insatiable demand.
The creation of development land in Hong Kong’s mountainous landscape can be prohibitively costly and time-consuming. Even that may not be the hardest part.
To make it work, the government would need to get developers to buy the land it created to build apartments for sale to the public, at a profit. The idea of increasing supply to depress prices is never going to be part of the developers’ business plan.
With little hope of breaking the developers’ stranglehold on housing supply, the government’s only option is to build more public housing for sale or rent at subsidized prices to qualified applicants in different income strata who cannot afford private-sector housing. Past experience has shown that the government can save capital costs by requiring developers to build public housing on part of the land they bought as a condition for sale.
To address Hong Kong’s shortcomings in innovation and creativity, the government established the Innovation and Technology Bureau in 2015. Much has been done since, as the long list of actions and initiatives in the report show. But the report made hardly any mention of the results from these various initiatives.
All it said was that since 2012, more than 5,000 senior citizens have learned to use mobile devices to gain internet access. Apparently, the government will need to exert greater efforts, or streamline its schemes, to raise the interest of the young entrepreneurs it’s trying so hard to engage.
Some economists question whether the government is putting too much emphasis on re-balancing the economy by developing the technology industry. They argue that the economy, as it is, has been doing fine under trying times as presented by the report.
An average economic growth of 2.4 percent a year in the past five years puts Hong Kong ahead of many developed economies registering an average growth rate of an anemic 1.7 percent. The relative high growth rate was accompanied by a persistently low unemployment rate of under 3 percent.
But, the overdependence on finance and property to drive growth has been widely blamed for the widening income gap which, according to various surveys, ranks the highest among the developed economies. The report gave a detailed account of the increases in government expenditure on social welfare for the relief of the poor and elderly.
The new administration has promised that more will be done in the coming years. There has been talk of a review of the tax structure to pave the way for greater government intervention in income distribution.
Hong Kong is facing many new challenges that call for fresh thinking and an unconventional approach to deal with them over the next five years.
The government will need to exert greater efforts ... to raise the interest of the young...
The author is a veteran current affairs commentator.