In Hong Kong, housing seems not affordable for most people due to the high property prices. However, the investment in local property market is still active with the prices of private flats ever soaring. Recently, the society sees heated debates on whether the government should re-launch the Home Ownership Scheme (HOS) to assist low-income families by subsidized home purchase. Why are the local property market forces not at work in making housing affordable? In this issue, Prof. Francis Wong of the PolyU Department of Building and Real Estate analyses the phenomenon of the local housing market.

Why is housing not affordable for most people in Hong Kong?

Theoretically, people demand a better living environment as their salaries increase. Property market price naturally rises over time with the increase in families’ household incomes. However, in this densely populated city, land supply is extremely limited. In addition, Hong Kong’s stable economy and solid legal foundation have attracted many overseas and Chinese mainland investors to invest in our real estate market. All these factors have contributed to the escalating increase in property prices which cannot be matched by the pay rise of local residents.

Although housing is a necessity, why does the recent discussion focus on purchasing, rather than renting a flat?

Buying or renting a flat is a personal preference and decision. However, in the traditional Chinese society, people value a stable living environment. Owning a flat provides more stability than renting one to avoid possible rental increase and termination of tenancy by the landlord. For families with children, home purchase may be preferred for the sake of stability. On the other hand, working youngsters who live a simpler life may prefer to rent a flat for the flexibility of home move following the change of job.

Does the government have the responsibility in assisting low-income families to acquire affordable housing using public funds?

The government has a responsibility to provide safe shelters for its citizens. Government assistance can be in the form of subsidized house rental or subsidized home purchase, depending on the beneficiaries’ affordability and financial situation. In my opinion, the government should only assist those families who cannot afford to rent or purchase houses in the private market.

Do you think that the government should subsidize young people in home purchase?

I think that the government should provide a “housing ladder” for young people to improve their living environment over time. Young people may start off living with their parents, and then later rent a flat in the private market or under the heavily-subsidized Public Rental Housing (PRH) Programme, followed by using their savings to purchase private housing or HOS flats which are priced at about 70 percent of the market price of private housing in the same district.

There are arguments for and against re-launching the HOS. What is your opinion?

Nowadays, real estate developers focus on building luxurious residence. As such, the market is lack of low-priced flats for young people’s first time home purchase. In view of this, I agree that the government should carefully consider the re-launch of HOS and cautiously work out the number of HOS flats to be built.

The government has been criticized for making too much market intervention in the housing policy. Do you think that the government should let the free market work?

Currently, the free market is not working properly. The first reason is that property developers have supplied only a small quantity of new flats to the market in recent years, mainly real luxurious residence or “packaged” luxurious flats for higher selling price. Secondly, there is a massive influx of cash-rich Chinese mainland buyers. Coupled with the effect of herd instinct and media publicity, the property prices are being pushed up further. Thirdly, some “packaged” luxurious flats are built in non-luxurious districts. However, overseas buyers, including the mainlanders, may not have knowledge about this and think that the flats worth the high prices set by the developers.

Due to the above reasons, the property market cannot effectively provide the aforesaid “housing ladder” in its free operation. From a macro point of view, the government should ensure this “housing ladder” exists so that people’s living environment can improve over time. As a result, government intervention is necessary to fill loopholes and monitor the property market operation.