Why it’s hard to find a house in Hong Kong
Strolling down Hong Kong at night, you might wonder why everyone’s talking about a housing shortage. You’re bound to see hundreds of darkened windows in the city’s tall apartment buildings.
The lights aren’t on, no one’s actually living there – but the offshore owners probably aren’t interested in renting their holiday home or business flat. There have even been conversations about passing a law to impose tax on empty properties.
This demonstrates the kind of quirks in Hong Kong’s housing crisis.
In 2017, the city state reportedly had the highest housing prices in the world. It’s not likely to change soon. According to the Demographia International Housing Affordability Survey, a typical apartment in Hong Kong would set you back about HK$5.42 million (US$692,700) last year. This was 148% more than Tokyo, 74% more than a similar flat in uptown New York, and 18% more than London itself, that British capital internationally renowned for unaffordable prices.
So what’s the cause?
To start, there’s a strong demand from foreign and mainland China buyers, encouraged by low interest rates. Hong Kong is becoming a popular tourist destination which makes it attractive not just to workers but holiday seekers. Being a large, heavily populated city on a small island with limited space, it’s a case of supply and demand at work.
There’s also a trend towards building smaller flats, which can actually fetch higher rent or sale prices than larger properties. If you can build five flats instead of just three in the same space, and charge a higher price for a smaller flat, what’s your best financial decision as a developer?
Let’s not forget the relationship of the government to the property market.
In Hong Kong, the government owns all the city’s land. It leases it to a number of developers for commercial building or housing, usually on a 50 to 90 year lease. Because developers bid on leases and pay a “land premium” fee that reflects the expected value of the site at the time, setting a higher price after development helps reap a bigger profit.
And there’s also a claim that government subsidised housing has contributed to the housing problems. Cheap houses (for those residents who are eligible for the subsidies) have led to less people living in each flat. This suggests that there may be greater supply than is commonly told. It’s just that the demand (or, expectations) is simply too high.
If you’re an expat relocating to Hong Kong, the state of housing can be a daunting prospect. Still, a little advance planning and preparation pre-move goes a long way. Let us also console you with the following cheery thought:
At least housing seems to be a global problem.