Multipronged approach needed to tackle housing crisis in HK
In her maiden Policy Address, Chief Executive Carrie Lam Cheng Yuet-ngor changed the direction of the government’s housing policy, from focusing on increasing land supply to helping people purchase their own homes. The significant change has unsurprisingly led to heated debate in the community.
Indeed many people, apparently not only young people, crave homeownership. For many years, Hong Kong society has had a cult-like obsession with buying homes. It is commonly believed that property equates to wealth; owning a rental property is the best retirement protection; the easiest way to become rich is to buy a flat. Couples-to-be are pressured to buy a new apartment, otherwise they would be despised by the in-laws. Tenants are haunted by the unpalatable feeling that they are unwisely repaying the mortgage loans of their landlords. The sharp rise in property prices in recent years has increased the net wealth of property owners but those who own no property are left behind. However, people should be reminded of the bitter experience of the previous property meltdown which is now rarely mentioned.
The government’s decision to encourage property ownership is a response to the community’s need and is commendable. The Home Ownership Scheme (HOS) is a time-tested and effective scheme; it has helped tens of thousands of families own their residential property at reasonable prices over the past decades. In other words, supporting and subsidizing citizens to buy their own home has been a standing policy for years and is nothing new. In view of today’s high property prices, many are envious of Singapore’s Home Ownership for the People Scheme which permits affordable home purchase and is a cornerstone of social stability. Nonetheless, with Hong Kong’s mature economy and property market, it is no longer feasible to undertake drastic changes or set a specific homeownership rate target.
Given the circumstances, there are three things the government should do. First of all, it should step up efforts to build more public rental units to provide a decent shelter for the poor and needy. The target waiting time for public rental units has to be lowered back to three years on average since there are still too many families living in very crowded subdivided units in old and dilapidated buildings. Secondly, it should continue to provide subsidized HOS flats for families with higher income and asset levels than the thresholds for applying public rental housing. After all, there is a strong demand for homeownership that the government has to address.
Last but not least, it needs to regulate the land supply to ensure the stable development of the private property market. Wide price fluctuations over past 20 years are ultimately due to the lack of flexibility in land supply. There were times when tens of thousands of new units suddenly flooded the market — at some other times no government land was sold at all. The market reacted violently to these changes, and at one time plunged by about two-thirds in 2003 from the previous high, then surged fivefold in subsequent years. Such price instability has a detrimental effect on the economy, social stability and the mindset of people of all generations. When speculating on property prices can earn one so much money in a short period of time, who would still be interested in investing in research and development, starting new businesses or further education?
On paper, the government owns most land resources in Hong Kong, but it is constrained by many factors which, unfortunately, have compromised its control of land supply. There are many challenges in managing government land in Hong Kong such as unclear land use, lengthy rezoning processes and lack of manpower to enforce laws. The government has the legal authority to resume private land for large-scale development but often faces strong opposition from land owners and tenants. The demand for small village houses has kept on increasing because of population growth in the rural areas while the country parks cover a large part of Hong Kong’s land area. Private developers have huge land reserves in the New Territories but the process of negotiating for and settling land premiums is hopelessly timeconsuming. As a result, it is no longer possible to launch large-scale land reclamation projects similar to those that bred new towns such as Sha Tin, Tuen Mun and Tseung Kwan O. Moreover, the public demands a higher living standard and better environment which adds more constraints to town planning.
None of these obstacles can be easily removed or mitigated. As such, the government can only take some relatively minor measures to regulate the market, such as introducing new levies, tightening mortgage applications and selling public housing units. It seems that we may have to endure more property price fluctuations, which may not be good news for both homeowners and aspirants.