Letters | How Hong Kong can tackle rising rents and boost the economy

Readers discuss Hong Kong’s property market, and a police shooting

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A ferry sails in front of residential buildings in Hong Kong on September 24. Photo: Bloomberg

Published: 11:37am, 3 Oct 2024

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Only around 50 per cent of households in Hong Kong own homes, meaning the other 50 per cent are renters. Although the government introduced tax relief for renters in the 2022-23 budget, based on Centaline’s rent index for private sector housing, rent has increased around 14.6 per cent since the start of 2023. This is significantly faster than both consumer price index inflation (2.9 per cent) and household income growth (1 per cent) over the same period.

There could be two reasons for such rapid rent growth. First, the number of households has increased faster than the number of homes available for rent. Second, first-time buyers are putting off purchases because of confidence issues. While the second issue is hard to solve, the first can be tackled by changing government policies.

According to census department data, between 2021 and 2023, the number of households increased by 76,300, while the number of completed properties stood at about 94,478. On the surface, this does not suggest a shortage. However, when comparing the increase in the number of households in owner-occupied flats with the increase in the number of newly completed private sector flats, my calculations show a shortfall of around 1,500 units.

Public sector housing is rightly reserved for those that meet the stringent eligibility requirements, and demand remains significant as unsuitable subdivided homes are replaced. For the rest, like it or not, despite the rise of institutional landlords, mom-and-pop buy-to-let investors supply most of the private-sector rented properties. To tackle the rapid rise in rent, boosting the supply of rental properties is essential.

Some may argue for New York-style rent control, but this may distort the market significantly. The current regulation requires second-property buyers to stump up a 40-50 per cent deposit. This is in stark contrast to the 10 per cent deposit required for first-time buyers in Hong Kong and 15 per cent for second-home buyers on the mainland.

Considering the lacklustre demand for flats because of poor homebuyer confidence, the authorities should consider converging the loan-to-value ratio for purchasers of a second property looking to rent it out with the LTV for first-time buyers. This will not only boost the number of available properties for rent and limit rent increase, but also reduce household expenditure pressure and increase available funds for spending in the high street.