The housing market is quickly climbing out of the post-Chinese New Year slump, with pre-owned home prices and residential price index rising robustly, and many homeowners raising asking prices or even refusing to sell for now. In addition, the Federal Reserve announced in March that it would put a stop to rate hikes for the rest of the year and end balance sheet reductions by August. With the possibility of rate hikes significantly reduced, it seems that it is only a matter of time before home prices reach new heights following less than six months of adjustment—bad news for young people looking to buy their first home.
The rising home prices are due to a complex combination of factors. Sadly, there is little we can do about external influences such as interest rate fluctuations, but what we do have control over is housing supply.
In the past, many believed that speculators were to blame for soaring housing prices. However, after years of cooling measures, speculators have all but disappeared from the market, yet home prices are still skyrocketing, thanks to the double whammy of supply shortage and low interest rates.
Costing a staggering HK$624 billion, the Lantau Tomorrow Vision project involves large-scale land reclamation and, to some extent, will have a negative impact to the surrounding eco-system. On the other hand, a subdivided flat currently costs at least HK$6,000 a month, while nano flats are selling for HK$10,000 to HK$20,000 per square foot and the average living space per capita is a meager 170 square feet. It is no wonder, then, that our young people are frustrated and disheartened. Their resentment towards the government and the widening social divide is a testament to the severity of the city’s housing crisis. Lantau Tomorrow Vision, which will provide a significant amount of land and housing, is an obvious answer to our conundrum.
Of course, questions have been raised about cheaper and more environmentally friendly alternatives to increase land supply. Reclaiming a small fraction of country parks sounds like a great idea to me, but will it be approved by the Legislative Council? Developing brownfields seems like a wonderful solution, but it comes with a host of problems: brownfields are scattered around the city and each site can only provide a very limited plot of land, while relocating all the existing commercial activities can be a huge challenge. Therefore, while the government needs to put these alternative solutions to use, we should be realistic with our expectations of what they can achieve.
After all, land reclamation is nothing new to Hong Kong. In fact, it was decades of reclamation that gave us new towns such as Sha Tin, Tai Po, Tuen Mun and Tseung Kwan O, and then housed half of the city’s population. Upon completion, the Lantau Tomorrow Vision project will provide 150,000 to 260,000 housing units, with the ratio of public-subsidised housing to private housing units set at 7:3. This will help immensely with alleviating the housing pressure for younger generations and in turn help ease social conflicts.