Hong Kong’s property speculators create housing nightmare
Monday, 26 October 2009.
Public house-building cut by half • One in nine construction workers unemployed • Luxury apartment sold for world record 57 million US dollars
Vinent Kolo, chinaworker.info
“The Hong Kong government is turning a blind eye to this problem and it will lead to social unrest.” This is what one protester told chinaworker.info on Sunday 25 October, as around 300 angry citizens marched in a protest against the sky-high cost of housing. Hong Kong is Asia’s most expensive city outside Japan. To find out why you must look at the property sector. Labour is cheap in Hong Kong, but accommodation and business rents costs the earth. The reason for this is the stanglehold that a cabal of property developers and speculators have over the economy and a pliant government which serves them the land – sometimes free of charge!
The developers have become hate objects among growing layers of ordinary people as more and more examples crop up of law-bending (if not breaking) and blatantly dishonest marketing tricks. As Craig Stephens of Market Watch comments, “Not only do they operate in an oligopolistic market with squeezed supply, it seems they can make up the rules of the property game as they please.”
Average house prices in Hong Kong’s ‘mass market’ have shot up by 27 percent this year, while prices in the luxury sector are up over 40 percent! This is the result of furious speculation including “hot money” from outside, and low interest rates under government ‘stimulus’ arrangements. Yet despite the price surge, the government of Donald Tsang denies there is a bubble or indeed even a problem.
“Donald Tsang’s claim that the price of property is still lower than it was in 1997 is simply cold-blooded,” said the organiser of Sunday’s protest, Caring Hong Kong convener Kwok Ka-ki. “Action must be taken before the property market returns to that absolutely insane level.”
Similar warnings are being issued by financial commentators. The supply of new apartments in Hong Kong – with the government controlled sector virtually “on strike” – has slowed to the lowest level in five years. “Limited new supply and low interest rates encourage investors to enter the property market for investment,” said Eric Wong Chun-yu of UBS [South China Morning Post, 24 October].
The term “investment” here is a euphemism for “speculation”.
Bubble – again
In much of Asia, in contrast with the depressed housing markets of the U.S. and most of Europe, property prices are surging. Much of the upward pressure is coming from speculation, however, fuelled by massive amounts of government liquidity pumped into economies as ‘stimulus’ since last year’s recession began. In Hong Kong’s case, a big part of this speculative capital is coming from mainland China. Mainlanders account for a tenth of all sales this year and one in four sales in the luxury sector. Many of these purchases – and this applies in general, not just to mainland Chinese buyers – are not for residence but just for speculation, to sell again at a higher price. Like all bubbles, this will end in tears. But it will be, and already is, ordinary workers and middle class Hong Kongers who suffer.
The government and its tycoon friends argue that any price bubble is confined to the luxury sector. But no one should be fooled by that argument. As Stephens of Market Watch points out: “For some reason Donald Tsang believes he can ring-fence price inflation to just the luxury sector of the super-rich. The logic of this looks flawed: Prices have been rising in the mass residential-property market, while anecdotal evidence shows wider prices rises across the economy.” [Market Watch, 25 October]
As developers rush to build luxury projects to meet the ‘demand’ from speculators, this reduces the supply of affordable housing (confirmed by statistics below) and drives up prices across the market as a whole. That is, until the whole market goes into a nosedive again, once the speculators take fright and begin selling their “investments”. These simple facts did not stop the property developer Ronnie Chan Chi-chung hitting out at government critics: “If there’s a bubble in the luxury property market, it will not have a huge impact on the livelihood of the general public, so what are you worried about? If those rich folks from the mainland or Hong Kong are buying luxury flats, you should just let them.” [South China Morning Post, 21 October]
On a recent radio talkshow guested by Donald Tsang, a young doctor complained that together with her lawyer boyfriend’s salary, the couple could not afford to buy a home. Tsang told the couple to be “less picky” and denied that prices had returned to their 1997 bubble level.
“Cage dwellers”
At the same time Hong Kong’s property speculators were celebrating a new world record. A so-called duplex (a two-unit apartment building) on the 43rd floor of a new luxury project was sold for HK$439 million (US$56.6m). Measured by square footage this is the most expensive apartment in the world, trumping the previous record holder near London’s Hyde Park. At the same time as speculators and the fabulously wealthy indulge themselves, at the opposite end of Hong Kong’s housing market we have the scandal of ‘cage dwellers’.
These workers, migrants, and unemployed, are too poor to rent anything other than a squalid wire cage large enough only for a mattress. According to the Society for Community Organisation (SCO), there are over 100,000 cage dwellers in Hong Kong. Rents for these inhuman contraptions have risen by 50 percent in the last three years as ‘demand’ has increased. “The rents are likely to grow as the demand for cage homes is on the increase amidst mounting job losses,” said one ‘cage’ landlord.
Monday, 26 October 2009.
Public house-building cut by half • One in nine construction workers unemployed • Luxury apartment sold for world record 57 million US dollars
Vinent Kolo, chinaworker.info
“The Hong Kong government is turning a blind eye to this problem and it will lead to social unrest.” This is what one protester told chinaworker.info on Sunday 25 October, as around 300 angry citizens marched in a protest against the sky-high cost of housing. Hong Kong is Asia’s most expensive city outside Japan. To find out why you must look at the property sector. Labour is cheap in Hong Kong, but accommodation and business rents costs the earth. The reason for this is the stanglehold that a cabal of property developers and speculators have over the economy and a pliant government which serves them the land – sometimes free of charge!
The developers have become hate objects among growing layers of ordinary people as more and more examples crop up of law-bending (if not breaking) and blatantly dishonest marketing tricks. As Craig Stephens of Market Watch comments, “Not only do they operate in an oligopolistic market with squeezed supply, it seems they can make up the rules of the property game as they please.”
Average house prices in Hong Kong’s ‘mass market’ have shot up by 27 percent this year, while prices in the luxury sector are up over 40 percent! This is the result of furious speculation including “hot money” from outside, and low interest rates under government ‘stimulus’ arrangements. Yet despite the price surge, the government of Donald Tsang denies there is a bubble or indeed even a problem.
“Donald Tsang’s claim that the price of property is still lower than it was in 1997 is simply cold-blooded,” said the organiser of Sunday’s protest, Caring Hong Kong convener Kwok Ka-ki. “Action must be taken before the property market returns to that absolutely insane level.”
Similar warnings are being issued by financial commentators. The supply of new apartments in Hong Kong – with the government controlled sector virtually “on strike” – has slowed to the lowest level in five years. “Limited new supply and low interest rates encourage investors to enter the property market for investment,” said Eric Wong Chun-yu of UBS [South China Morning Post, 24 October].
The term “investment” here is a euphemism for “speculation”.
Bubble – again
In much of Asia, in contrast with the depressed housing markets of the U.S. and most of Europe, property prices are surging. Much of the upward pressure is coming from speculation, however, fuelled by massive amounts of government liquidity pumped into economies as ‘stimulus’ since last year’s recession began. In Hong Kong’s case, a big part of this speculative capital is coming from mainland China. Mainlanders account for a tenth of all sales this year and one in four sales in the luxury sector. Many of these purchases – and this applies in general, not just to mainland Chinese buyers – are not for residence but just for speculation, to sell again at a higher price. Like all bubbles, this will end in tears. But it will be, and already is, ordinary workers and middle class Hong Kongers who suffer.
The government and its tycoon friends argue that any price bubble is confined to the luxury sector. But no one should be fooled by that argument. As Stephens of Market Watch points out: “For some reason Donald Tsang believes he can ring-fence price inflation to just the luxury sector of the super-rich. The logic of this looks flawed: Prices have been rising in the mass residential-property market, while anecdotal evidence shows wider prices rises across the economy.” [Market Watch, 25 October]
As developers rush to build luxury projects to meet the ‘demand’ from speculators, this reduces the supply of affordable housing (confirmed by statistics below) and drives up prices across the market as a whole. That is, until the whole market goes into a nosedive again, once the speculators take fright and begin selling their “investments”. These simple facts did not stop the property developer Ronnie Chan Chi-chung hitting out at government critics: “If there’s a bubble in the luxury property market, it will not have a huge impact on the livelihood of the general public, so what are you worried about? If those rich folks from the mainland or Hong Kong are buying luxury flats, you should just let them.” [South China Morning Post, 21 October]
On a recent radio talkshow guested by Donald Tsang, a young doctor complained that together with her lawyer boyfriend’s salary, the couple could not afford to buy a home. Tsang told the couple to be “less picky” and denied that prices had returned to their 1997 bubble level.
“Cage dwellers”
At the same time Hong Kong’s property speculators were celebrating a new world record. A so-called duplex (a two-unit apartment building) on the 43rd floor of a new luxury project was sold for HK$439 million (US$56.6m). Measured by square footage this is the most expensive apartment in the world, trumping the previous record holder near London’s Hyde Park. At the same time as speculators and the fabulously wealthy indulge themselves, at the opposite end of Hong Kong’s housing market we have the scandal of ‘cage dwellers’.
These workers, migrants, and unemployed, are too poor to rent anything other than a squalid wire cage large enough only for a mattress. According to the Society for Community Organisation (SCO), there are over 100,000 cage dwellers in Hong Kong. Rents for these inhuman contraptions have risen by 50 percent in the last three years as ‘demand’ has increased. “The rents are likely to grow as the demand for cage homes is on the increase amidst mounting job losses,” said one ‘cage’ landlord.
