What is the cost of housing in Hong Kong?

There is a shortage of housing in Hong Kong. Actually, there seems to be building all the time and new flats are being regularly put on the market, but they are expensive. Indeed a trawl through the real estate adverts reveals a less than 500sq foot flat (1 bedroom) that is on sale for just over $10 million (HK), which when you do the conversion is a bit under $1.3 million US. This is not a particularly spectacular flat in a particularly spectacular location. This is about normal. It will rent for about $31,000 per month (about $4,000 US/£2,500), which is also normal. The thing is, according to the last census, nearly 60% of the population earns less than $25,000 (HK) per month. In fact, if you think about it, to get a mortgage for this ONE BEDROOMED flat, you would need to earn in excess of $100,000 (HK) per month, quite a bit in excess. The same census figures reveal that less than 5% of Hong Kong’s population earns more than this. There is a numbers problem here. So what do people do?

New Territories, Hong Kong.

New Territories, Hong Kong.

There are a number of fairly shocking strategies that people resort to in order to live. One solution has been to live in what are effectively shanty towns. These illegal structures have been a part of the Hong Kong city scape since the beginning. Indeed, remember the scene in the wonderful movie The World of Suzie Wong? (Spoiler alert) Torrential rains are part of the situation here in Hong Kong, and as much of this housing is build on the steep slopes, it is clear that accidents like the one in the movie are part of the hazard of this city. According to the government nearly 300 incidents of land slides are reported each year, and over the years hundreds of people have died. Indeed, Hong Kong spends over a billion dollars a year maintaining the slopes.

Stilt house on the waterway in Tai O.

Stilt house on the waterway in Tai O.

Similar to this, of course is the stilt housing that you might find in Tai O, though these are celebrated as traditional forms of housing and tourists flock to wander the boardwalks of the village. You can also get a view via the boats that will take you on a tour of the water ways. A living museum, but also a damp and precarious way to live.

Of course, perhaps one of the most shocking solutions is the subdivision of small flats into what are known locally as cage houses. This is effectively a one room flat that is divided via metal cages or bamboo into several units that are just large enough to hold a bed and maybe a chair. Sometimes the space within the cage extends to the ceiling, meaning that a bunk bed can go into the space, and then a family can live there. Sometimes the cages are stacked on on top of the other so that the dweller(s) cannot stand. Twenty-five to thirty people can live in a divided flat. Those near the windows, pay a bit more because they have access to direct air circulation, though this is not necessarily fresh air as Hong Kong has a problem with pollution. In the winter months, the temperatures within the flats are ok. In the summer months, when the average temperature outside is 35 C, and humid, the flats are unbearable. But you can rent such a space for about $2000 (HK) a month. All residents share one lavatory with a shower and a shared cooking area. SOCO, a local charity that is highly involved in publicising the housing problem for the poor estimates that the cost to rent a cage house in Hong Kong per square foot is greater than if you were to rent in the midlevels (a more affluent part of town), it is just that in the mid-levels you have to rent the whole flat. SOCO also estimates that there are over 100,000 people living in cage houses in Hong Kong.

Taken by SOCO.

Taken by SOCO.

Every year SOCO participates in a local arts project to make visible the situation of cage houses. The most recent exhibition was calledSojourning as Tempura. A google images search will locate many of the photos from the publication. What is particularly striking about the recent photos is that they are taken from above; a birds eye view of life in a cage house.

People who live in this housing are all ages, from the very old to the very young, from single people to families. While not as susceptible to the perils of landslides as those who live in the shanty towns are, the big danger here is fire. Buildings within which the cage houses are located are old. Electricity cables are out in the open and are a spagetti mesh at ceiling level. Often unscrupulous landlords have built subdivisions such that block entrances and roof access because sometimes additional housing is built illegally on rooftops. Indeed as recently as October 2012, 9 people were killed in a blaze because they could not escape their flats due to blocked exits (South China Morning Post, 13 Oct 2012). Sadly, fire is a reoccurring story in Hong Kong and one which initially moved the British colonial government to build the first housing estate in Shek Kip Mei in the 1950’s after a fire made more than 50,000 people homeless overnight.

Sleeping in a pedestrian underpass

Sleeping in a pedestrian underpass

While not as visible as in many cities in Europe and North America, there are also homeless in Hong Kong, which one runs across sleeping under roadway flyovers or in the lesser used pedestrian underpasses. The 2011 HK census identifies nearly 60,000 people living in temporary or non-domestic quarters, where non-domestic can be anything from an industrial unit (a la loft living, albeit illegally) to living in a builders shed or like this man in the underpass.

Hong Kong is touted as being one of the freest economies in the world. This sort of freedom comes at a cost, one which is paid for primarily by the poor. I hear expats working in the city talk about the expense of living in Europe compared to the benefits of living in Hong Kong. They argue Hong Kong is better because it is cheap. But cheap in what way? Cheap not in terms of housing, but in terms of taxes. Of course low tax means limited spending on social services to support those who are most marginal in society: children, the elderly, the ill. I read the news reports of politics in the US and I see the rise of a mean public discourse, and here I refer to a tightness or an unwillingness to share or give. I hear this discourse and I think of Hong Kong. Is this really what we want our future to look like? Do we want cage houses and shanty towns to be a normal part of the urban landscape? Is it acceptable that housing is unaffordable to the majority of the population and that we as a society are not responsible for contributing to the solution? Is it acceptable to be mean?

red covers

You can read more about landslides in Hong Kong here.

SOCO’s web site is here, though mostly of the information is presented in Chinese. You can cut and paste the documents into a translator, such as you might find of Google in order to read the reports. I find this is pretty reliable.

If you want to know more about Shek Kip Mei Estate, you can find information collected by my students here. There is also information about both the fire in Shek Kip Mei and the history of public housing provided by the Hong Kong Heritage Museum available from here.

11 thoughts on “What is the cost of housing in Hong Kong?

  1. I noticed that many people talk about gentrification and greed etc. I feel that most fail to understand the root cause of our existing problem.

    We cannot embrace an open economy and globalisation without expecting there to be a severe income inequality and gentrification. The two are mutually exclusive and incompatible.

    Having said that, it is also necessary to also point out that asset hoarding and gentrification is made worse in the past two decades due to the self-serving policies of the Federal Reserve, which has had consequences that reverberate throughout the world. The protracted ultra low interest rate policy, huge fiscal deficits and massive government spending, compounded by the subprime loan fiascal and the aggressive buildup of the military complex has only served to utter debase the US currency and other all forms of soft assets.

    Instead of pointing the finger in the vague general direction of “greed rich (and foreign) people”, the attention should be focused soley on the dysfunctional US political system that has been bought by lobbyists employed by large corporations.

    • I want to clarify that the second message (the one about gentrification and US policies) was in response to the comments left on the page and not the author.

  2. While I wholehearted agree with the sentiments of the article, it seems the author erred when it came to her implied solution. It seems from the article that the way to help the underprivileged is to increase taxation so that social services can be improved. This is both undesirable and unnecessary.

    [1] It has been shown repeatedly that increasing the tax rate and the tax base only serves to hurt the middle class who themselves are already under financial stress. Taxation loopholes allow the rich to pay no tax and this is the problem that should be addressed.

    [2] HK people are already paying taxes, albeit indirectly. A major source of government income comes from land sales. These land represent equity that belongs to each citizen of HK. During land auctions, developers only bid at prices in which they can still generate a competitive positive return. These land prices, usually in the many billions of dollars need to be recouped by multi million dollar finished properties, which in term require very high rents to generate sufficient yield. The businesses which rent these properties in turn have to charge the consumers a large premium on top of the base value of the goods and services offered. That’s why HK restaurants are one of the worst and yet most expensive in the world. We are all paying tax, but in a very inefficient way, with the rich taking a cut at every point in the property chain.

    [3] The HK government does not require more income. It has a perennial budget surplus. Imposing taxes on the middle class just allows the government to waste even more of it on unproductive projects such as building Disneyland or the Macau-Zhuhai bridge. A better allocation of existing government resources to help the poor is definitely a worthy endeavour.

    [4] There isn’t a property shortage problem in HK. The property market in HK are not really constructed for use by local residents and businesses. It is a hard asset that is acquired by legitimate mainland Chinese investors who perceive HK property as a good store of value given its better legal system and stable exchange rate. At the same time it is used by corrupted mainland Chinese money launderers to move assets out of China. Coupled with the threat of US currency war and a debasement of soft assets (ie cash), property prices will remain at elevated prices. Taxing foreign investors and money launders like Singapore would definitely be beneficial to HK residents. But this is politically impossible since HK’s sole value to the world and to the mainland is that of a asset smuggling / transformation hub. The so called cliched gateway.

    [5] Increasing the supply of public housing would make it worse for those who aspire to private housing. The normal intuition is that prices would fall due to lower demand. But instead the opposite happens. By increase public housing, we are moving simply moving those 200sqft private properties to higher income buyers who will be paying the same amount that they originally had intended to (ie the maximum they can afford), but now for a smaller home. Developers charge what people can afford, not what the property is “worth”. So the situation is even worse for those just out of reach of government subsidies. In other words, moving more and more people into subsidised or public housing will remove the arbitrage opportunities that help keep property prices in equilibrium. (To clarify, increasing the safety net by building more public housing is bad, but making sure that those who slip through the net get the housing they deserve is definitely a good thing. We must get rid of caged homes and shared flats.)

    [6] Hong Kong does not have a shortage of land. It has a lot of land that were already bought by land developers but are kept undeveloped in their private land banks in order to tightly control the supply. If the government had enough guts to implement a punitive tax on unused land held by developers as land banks, it should go some way to bring property prices down to less overstretched levels.

    In summary, we should try to lower property prices by increasing the supply of private property, rather than by reducing the demand (through public housing). Regulations on undeveloped land is one way (and make sure it doesn’t have the unintended consequences of making developers build acres of parking lots). Secondly we need to reallocate available resources more efficiently. This applies to the proper allocation of government budget as well as the allocation of public housing. Clearly people are falling through the safety net, not due to a lack of resources but due to bad bureaucracy.

    (Sorry about the poor grammar and typos – this was composed on a phone while on the bus.)

    • Thanks for your thoughtful comments. I think we might have to disagree about market mechanisms being the best answer. Tax incentives to build low income housing may be one part of the solution, though not a sufficient one I don’t think. I would agree that better governance that supports vulnerable people rather than governance that supports only the wealthy to get richer is indeed needed.

      I presume your bus is in Hong Kong? Lucky you to have a seat from which to type! :-). Also, do try under bridge spicy crab in Wan Chai. Yum yum!

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  7. Thanks for your comments bluepearlgirl. It think it is a fine line between keeping housing affordable and defensive localism. Policy that keeps new people out is also as limiting as neoliberal greed. Providing affordable housing for people is key, but affordable housing with community and opportunity. I don’t know that how to do this has been accomplished, though Amsterdam offers some interesting possibilities.

  8. This is a really great article. This is the future that San Francisco is facing and fighting over right now. And in fact i would not be surprised that it is Hong Kong that owns a huge number of the properties here. Greed is evil and it sucks the community and soul out of any city. The newcomers here do not understand what is in the balance when this argument comes up. Maybe someone here will read what you wrote about Hong Kong and see that if we do not regulate the growth, then we could end up just like that! Thank you!!

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