Property prices in Hong Kong continue to remain high, and the dream of home ownership is beyond reach for many young people.
The Hong Kong Legislative Council Secretariat published the “Research Briefing on the Impact of Home Ownership on Hong Kong’s Social Economy” on March 1. According to the “Research Briefing”, among the overall home ownership owners, young people under the age of 35 accounted for only 7.6%. The average age has reached 44 in 2019.
The “Research Briefing” pointed out that Hong Kong property prices soared nearly four times in the 15 years from 2004 to 2019. However, the home ownership ratio dropped to 49.8% in 2019, the lowest in about 20 years. Although the data rebounded slightly to 51.2% in the fourth quarter of last year, it was still lower than the 2004 high of 54.3% and well below the average level of more than 60% in the rich economies.
In the context of severe land shortages and declining affordability of home ownership, the proportion of the young generation under the age of 35 in the overall homeownership has dropped from 22.1% (198,100) in 1997 to 7.6% in 2019 ( 98,200 people).
The report pointed out that young people in Hong Kong cannot keep up with rising property prices based on their work income alone, nor do they have enough financial resources to compete with other buyers in the property market. It is reported that the difficulty of home ownership is one of the sources of hopelessness for the young generation in Hong Kong. Looking at property prices from 2004 to 2019, the figure has soared by 391%. However, the median monthly income of Hong Kong households only increased by 78%, which is far behind the increase in the property market.
At the same time, the proportion of elderly people aged 60 and above among the homeowners of home ownership is 41% (536,000), becoming the main force in home ownership, which has doubled from 21% (192,100) in 1997.
Self-owned properties accounted for “inverted U”
In fact, the home ownership ratio in Hong Kong has shown an “inverted U-shaped” development in the past 23 years. The report pointed out that the ratio soared from 46.7% to the highest 54.3% during 1997-2004, and then stayed at about 53% until 2011, but then fell back to 49.8% in 2019 and 49.8% in the fourth quarter of 2020. 51.2%.
Statistics show that between 1997 and 2004, an average of about 62,000 residential units were completed each year in Hong Kong. Ample supply, coupled with the 52% drop in property prices triggered by the Asian financial turmoil, provides rare home ownership opportunities for first-time home buyers. From 1997 to 2004, the number of homeowners increased by 264,000, of which about half were private housing.
It is worth noting that between 1997 and 2008, the number of Hong Kong households increased by 354,000. During this period, the number of home ownership households increased significantly by 337,000, while the number of tenants increased by only 47,000, and tenants accounted for only 13%. This was mainly due to the abundant housing supply and affordable property prices at that time. This means that 1997-2008 can be described as the best time window for “getting on the bus” in the Hong Kong property market.
Since then, the SAR government has continuously tightened the supply of land and housing, and introduced a series of policies, including stopping land auctions, abandoning the set digital targets for home ownership, reducing the scale of new land development through reclamation and land leveling, and stopping indefinitely. Building subsidized sale houses, etc.
These measures have led to a cliff-like decline in the housing supply in Hong Kong, superimposed on the economic recovery, Hong Kong property prices rebounded sharply during this period, making most of the working class helpless to become renters. From 2009 to 2019, the overall number of households in Hong Kong increased by 335,000, while the number of homeowners only increased by 80,200 during the same period. However, the number of tenants living in public or private housing soared by 250,000, accounting for nearly 75%.
Property market wealth effect
With the continued boom in the property market, self-owned units have become an important source of wealth for wealthy families.
According to the statistics of the Rating and Valuation Department, it is roughly estimated that the market value of private residential properties in Hong Kong has tripled from 1997 to 2019 to approximately HK$12 trillion, which is higher than the 109% increase in GDP in the same period. In 2019, the total value of private residential properties in Hong Kong was approximately 4 times the GDP, which was much higher than 1.6 times that of the United States. The research report pointed out that the wealth effect brought about by changes in property prices can have a significant impact on local consumption and GDP.
In order to help the younger generation to buy a home for the first time, many initiatives have been made in the community to increase the supply of land and housing in recent years. With reference to the development experience from 1997 to 2004, when the supply of buildings is abundant, property prices can fall to an affordable level, and the home ownership ratio can also rise significantly as a result.
According to the latest progress report of the “Long Term Housing Strategy” issued by the SAR government in December 2020, after the public-private housing ratio was changed from 60:40 to 70:30 in 2018, private housing will be The target of building a house will only be an average of 12,900 units per year, which is lower than the actual average annual housing capacity of about 13,500 units in the past 10 years. Housing supply is still very tight.