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Opinion | Why Hong Kong’s property slump may be best time to focus on public housing
- With one in two Hongkongers locked out of the property market despite falling prices, it’s time to move towards the Singapore model of providing public housing for more people, not only the poor
- We can start chipping away at the problem by improving the design and quality of public housing, and allowing more Hongkongers to be eligible
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Who is hurting in Hong Kong’s weak property market? The government? Yes, because land premiums and stamp duties historically make up a significant part of government revenue.
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Last week, Finance Secretary Paul Chan Mo-po revealed revenues of HK$19.4 billion (US$2.5 billion) from land premiums in the current financial year and HK$50 billion from stamp duty. These were, respectively, just 30 per cent and 60 per cent of the estimated HK$65.6 billion and HK$85 billion. This shortfall is equivalent to nearly 80 per cent of the HK$101.6 billion deficit projected.
But the administration itself does not suffer – it is the people it serves who do, when funding for public services, infrastructure projects, welfare programmes and relief measures are affected.
Are property developers hurting? Yes, because they are sitting on excess inventory that they can neither sell nor rent out. In the third quarter of last year, the number of vacant new properties reached a near-20 year high, according to property agency Centaline.
But economic cycles and market fluctuations are part and parcel of a capitalist economy and developers are already responding with strategies, such as not tendering for any more land, tendering low bids and offering discounts. Despite falling prices, however, Hong Kong’s property market remains one of the world’s priciest. Developers can still walk away with a profit, albeit smaller than in rosier times.
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How Hong Kong's housing market became among the world’s most unaffordable
How Hong Kong's housing market became among the world’s most unaffordable
Are homeowners with mortgages hurting? Yes, especially those who bought around 2021, when prices peaked, and who face negative equity if the value of their properties falls below their mortgage. According to investment bank UBS, even with the complete removal of market cooling measures, property prices could still drop by 5-10 per cent this year.
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