It hasn’t been long since the government unveiled its Lantau Tomorrow Vision, and a protest—with a reported number of 6,000 participants—has already taken place. Amongst their slogans, “Pouring Money into the Sea” is a prominent one.
Any reclamation project would require a large amount of funds to kick off, just like you would need to invest a lot of money to start a business. In this sense, the primary phases of the Lantau Tomorrow Vision will be a metaphorical pouring of money into the sea. However, the initial costs shouldn’t be all that we focus on—according to the Policy Address, once the land is created, 70% will be used for public housing development, while the remaining 30% is to be sold to private developers, and let’s not forget that the government can expect sizable returns when selling land plots to developers. Therefore, I personally believe that the profits derived from this huge project will definitely outweigh the investment costs in the long run. Experts and scholars have also pointed out that the construction of the entire artificial island will take around 15 years to complete, so there won’t be a scenario where the project exhausts the government’s fiscal reserves at once. In addition, during the construction period, the government will be taking in more revenue every year. In 2017/18 for example, the Hong Kong government had a HK$138 billion surplus, making the total fiscal reserves a staggering HK$1.1 trillion. With so much money to spend, if the government continues to sit on the reserves and do nothing to address the housing shortage issue—one of the city’s most dire problems—how does it face the growing number of underprivileged citizens forced to live in tiny and hazardous subdivided flats? If Hong Kong’s already extreme wealth gap continues to widen, class conflicts will certainly worsen, putting the city’s order and security—and citizens’ quality of life—in jeopardy. Therefore, despite opposing voices from detractors, many have expressed the belief that most Hong Kong people are in fact supportive of the Lantau Tomorrow Vision. Nobody wants the next generations of Hongkongers to live in subdivided flats!
With daily news coverage on slashed secondary housing prices and stagnant sales of new developments, it seems Hong Kong’s real estate market has come to a halt. However, I don’t think that housing demand has actually disappeared. The waiting list for public housing applicants is getting longer by the day, and so is the number of subdivided flat dwellers; the upcoming phases of Home Ownership Scheme flats have received a record-breaking 260,000 applications. It’s not difficult to see that underneath the current icy surface is the molten lava of home-buying desire, waiting to erupt at an opportune time. The market’s current silence is just the calm before the storm. At the moment, geopolitical factors, interest rate hikes and economic instability are driving the housing market downturn, while the proposal of the Lantau Tomorrow Vision has gotten the public to think that there will be more housing supply in the future. Most home seekers are choosing to sit back and wait for further market adjustments to play out before making home purchases.
I’ve tried to run analyses on secondary properties sold recently at reduced prices, and discovered that apart from a few cases where luxury homes in non-central locations were sold at a loss, most sellers made a little bit less than they would have. I imagine that if and when home prices have dropped by nearly 20%, buyers with purchasing ability will be drawn to return to the market, which may trigger another huge wave of housing transactions.