Housing affordability problems of the middle-income people in Hong Kong

Abstract

 The housing policy environment of Hong Kong is non-enabling. Hong Kong People suffer from serious housing affordability problems due to ineffective governmental interventions and wrong use of instruments. The Hong Kong Government mainly relies on the financial or administrative regulations to cool down the property market. The regulations are Buyer's Stamp Duty (BSD), Special Stamp Duty (SSD) and mortgage restrictions, which are all belonged to demand side instruments. The Government implements the supply side instruments slowly and ineffectively. Those instruments are resumption of Home Ownership Scheme and new town development. According to the concept of housing policy environment, the Government should make use of both supply and demand side instruments simultaneously so that the interventions towards the market could be significantly and effectively.

The Survey of the study suggested that the mortgage restriction could not stabilize the housing price; but deteriorated the housing affordability problem of the middle income group. People opt to the public housing under homeownership scheme as they could easily get 90% mortgage from financial institutions. In other angle, after the implementation of mortgage restriction, the higher initial down payments make lower-middle income group more difficult to purchase a first housing unit in the private property market.

Based on the conceptual reviews and findings of the study, a number of policy recommendations were proposed with the reference of foreign experience.

Hong Kong Housing Authority (HKHA) shall take the role of the main supplier of public rental and sale housing units. Hence, the Government should strengthen the financial status of HKHA so that HKHA could have sufficient financial power for public housing development.

Resumption of regular land biding could increase the land market and increase the supply of private housing units in coming five years, which could stabilize the property price and even cool down the housing market to the reasonable level.

The Hong Kong Government could learn from the foreign experience and promote the public private partnership development programme. A development zone could be formed. The Government could formulate the requirement of the zone including the number of public and private sale housing units and then invite the private developers to bid for the project.

Because of the extremely high housing price in Hong Kong, Adjustment of the development density could generate valuable bonus. This approach could increase the supply of public housing apart from the direct supply from Hong Kong Housing Authority and Hong Kong Housing Society.

To solve the affordability problem of the middle group, the Hong Kong Government could provide subsidized mortgage to the eligible household. The interest rate shall be lower than the market level.