Why Housing is NOT Affordable in Hong Kong?

Transcription

1 ULI Hong Kong May 7, 2015April 2013 Why Housing is NOT Affordable in Hong Kong? Edward Yiu Associate Director, Institute of Future Cities Associate Professor, Dept of Geography and Resource Management, CUHK

2 Housing Price Hikes 300% in a decade >300% 2

3 Housing Price > Inflation When CPIA has increased by 6 times, CHPI has increased by 43 times 3

4 Housing Price > GDP Yoy of GDP and CHPI were similarly strong in the 1980s, but that of GDP is much weaker in the 2000s. 4

5 Housing Price > Rent > Income From 2008 to 2014 Private Household Income increased 54%; Housing Rent increased 87%; Housing Price increased 193%. 55,000 50,000 45, , ,000 30, HPI HRI Private Hsehold Income 25,000 20,000 15, ,000

6 Severely Unaffordable Housing for Years Housing Price to Income Ratio: HK 2012 = 13.5, HK 2013 = 14.9, HK 2014 = 17.0

7 HK: The Most Unaffordable Housing City in the world Housing Price to Income Ratio: HK 2012 = 13.5, HK 2013 = 14.9, HK 2014 = 17.0

8 Solutions to Unaffordability 1. Public Rental Housing 5. Repay Longer Solutions to Unaffordability 2. Smaller / Higher Density 4. Farther from Centre 3. Older / Poorer Quality 8

9 1. Public Rental Housing? 270,000 families have been queuing for a long time (3-10 years). 9

10 2. Smaller?

11 Country/ city Smaller? Ave. Living Area (sf) Per Person (sf) US 2,476 ~800 Taiwan 1,119 ~370 SIN 1, Tokyo 667 ~220 Shanghai HK Ave per person living area of HK = 1/5 of US

12 The Richest and the Poorest are paying the same unit rent! Sub-divided Housing Unit HK-design 30 sf HK$133 psf per month The Opus Frank Gehry-design; 6,000 sf HK$130 psf per month 晴報 19/01/ 劏房呎租最高約 133 元, 貴過同區豪宅逾倍

13 Denser?

14 Urban Population Density of HK, one of the highest in the world, is 3 times higher than SIN

15 Poorer Quality? 6,000 blocks (20%) of old building built before 1964

16 Decade s Max Tenure (MT) Repay Longer? HPI MTI Ratio (if RP=20yr) MTI Ratio (if RP=MT) 1970s 10 yr 20 NA NA 1990s 20 yr % (1997) 94% 2000s 25 yr 60 20% (2003) 18% 2010s 30 yr % (2014) 41%

17 Mortgage Game Simulations Selling Price (HK$) Max. Tenure Monthly Mortgage (if RP=10yr) Monthly Mortgage (if RP=MT) 1.0m 10 yr 6,488 6,488 (100%) 2.0m 20 yr 12,976 7,182 (55%) 3.0m 30 yr 19,464 7,920 (41%) 4.0m 40 yr 25,952 8,702 (34%) 5.0m 50 yr 32,440 9,525 (29%) 10.0m 100 yr 64,881 14,199 (22%) Max LTV = 70%, IR=2.15% Can Mortgage be Repaid in >50 years?

18 Why Housing is Unaffordable? When govt pushes: Money supply increases (due currency peg); Population growth by welcoming immigrants; Reduces land supply; No / Low Tax Housing market: Oligopoly Housing price must up : And unaffordable Population, Housing and Land Policy See Next Monetary Policy No Control Housing Market Oligopoly (cronyism) Linked Exchange Rate Currency and Nominal Interest Rate follow the US Fiscal Policy Low Tax No Vacancy Tax No Capital Gain Tax Property Tax? 18

19 Land Policy Border Great London, Great Manchester, Great Shanghai, Great Beijing, Great Cities, No Border Liveability is quickly deteriorating Environmental Threats (air pollution, ultra-high density, ultrahigh buildings) Land Monopoly and Housing Oligopoly No Population Policy No Population Policy, but Import Labor Policy only 19

20 1. Monetary Policy: RIR v. HPI

21 Corr=58%; Grad=-2.6% RIR v. HPI

22 Empirical Model RIR effect separate positive and negative RIR effect

23 Empirical Results -0.83% -2.61% 1% drop in RIR-,2.61% up in HPI

24 2. Restrictive Land Supply Peng, R. and Wheaton, W.C. (1994) Effects of Restrictive Land Supply on Housing in Hong Kong: An Econometric Analysis, JHR 5(2), When restrictions lead to an anticipated reduction in overall land supply, the housing market (correctly) expects higher future housing rents, capitalized into higher current housing prices. 24

25 Restrictive Land Supply Land (for all uses) Private Housing Units to be built Bef 1997 < 50 ha Ave. 26, / ha 9, / ha 10, / ha 8,750 Target - 20,000

26 Government Vacant Land Zoning Land Area (ha) Government Vacant Land (ha) % Residential 9, , % Commercial % Industrial 1, % GIC 3, % Recreation 2, % Total 58, , %

27 3. Fragmented Development Controls Regimes Consequences Problems Planning Control Lease Control Building Control Env. Control Town Planning Board members are appointed by Chief Executive Land Premium is Negotiable Prescriptive Code Decision makers are government officials Top down approach, and no monitoring system Government becomes an investor and profit oriented Rigid but can be waived by Authority s Discretions Top down approach

28 Brownfields and Vacant Farmland Use Land Area (ha) % R 7, % I/C 3, % G 73, % AGR 6, % GIC/ O 5, % ~800ha AGR land are Brownfields ~3,800ha AGR land are Vacant

29 Brownfields HK "brownfield sites" cover many different land uses, such as port back-up land, deserted or damaged agricultural land, industrial uses like workshops, recycling yards, open storage facilities, etc..

30 4. Crony-Capitalism 30

31 The End comments are welcome. Enquiries to: 31