Special Feature
Housing Hong Kong for the Future
Housing Hong Kong for the Future<br/>為未來打造安居之所

What can you buy with US$1.2 million? A castle in the southwest of France. At least ten American-brand electric cars. Or an average sized apartment in Hong Kong. 

A report released by CBRE Group this year covering 39 global cities showed that Hong Kong boasted the highest average home price at US$1.2 million (HK$9.3 million) as well as the highest average prime property price at US$5.9 million. 

Hong Kong was followed by Munich and Singapore, where the average home price was US$1 million and US$915,601 respectively. In terms of prime property price, Beijing came in second at US$3.3 million, while Munich was third at US$2.4 million. 

Soaring housing prices in Hong Kong can be attributed to the slowdown in housing supply. Government data shows that the production of private housing units has dropped by more than 50% over the past 13 years. 

Between 1978 and 2003, an average of 27,000 units were produced by private developers every year. The figures dropped to 12,000 between 2005 and 2018, and was only 13,643 last year.   

To increase the supply of housing units, the Government could consider speeding up new town developments and increasing plot ratios. 

 

Changing Face of New Towns

New town developments typically took around nine years to complete during the 1970s and 1980s. Today, the process takes much longer given the amount of bureaucracy involved.

During the 1970s and 1980s, the Administration developed new towns in the New Territories at a rapid rate. The top-down approach adopted at that time allowed these projects to be implemented quickly and efficiently, as the Government was not encumbered by the current prescriptive regulatory environment, which requires endorsement from almost all quarters. 

The first phase of new town development, which began in 1973, included Tsuen Wan, Sha Tin and Tuen Mun. The second phase, which began in the late-1970s, included Tai Po, Fanling, Sheung Shui and Yuen Long. This was followed by the third phase in the 1980s that included Tseung Kwan O, Tin Shui Wai and Tung Chung.

At the beginning, only 17% of the population lived in the New Territories as a result of these new town programmes. By the mid-1980s, this had risen to 35%. To date, nearly half of Hong Kong’s population live in newly developed areas. 

But critics say that the Government missed the opportunity to push forward development between 1992 and 2003, when construction costs were relatively low. 

The sluggish progress can be ascribed to the complexity of approval procedures now required. A study released by Hong Kong Institute of Surveyors in 2017 showed that the pace of processing town planning applications was slowing down the supply of developable sites for residential use.

The most common reason for deferment was due to extra time required for applicants to review and make clarifications on comments and questions raised by the Government.

According to the study, of the 1,400 cases submitted to the Town Planning Board for approval during 2013 to 2015, about one third were approved in a year on average, while more than half needed up to a further six months or longer to review.

 

The Hysan Legal Battle 

There have been suggestions that the Government should made more land available by using the Lands Resumption Ordinance, which empowers compulsory acquisition of private property for an established public purpose such as public housing, new town developments or community facilities.

But a landmark ruling in 2016 led the government to become wary of any action which might be deemed to be an infringement of private ownership. 

The right of private ownership under the Basic Law was underscored in the case of Hysan Development vs Town Planning Board (FACV 21/2015), where Hysan challenged the planning restrictions imposed by the Town Planning Board on the grounds that such constraints represented an unlawful interference with their constitutional property rights. The principle of proportionality was used as an argument against the Board’s actions, which were perceived as curtailing private property rights.

In its ruling, the Court of Final Appeal accepted the principle of proportionality as a valid test in determining whether a reasonable balance had been struck between upholding public interest and the negative effects of that decision on the rights of an individual group or person.

Since then, the government has gone out of its way to ensure compliance with Article 6 of the Basic Law to uphold the right of private ownership. 

 

Leveraging Infrastructural Benefits 

In theory, housing shortage should be a non-issue given that the number of housing stock is greater than the number of domestic households. 

As of 2018, the total number of housing stock in the city was about 2.8 million, comprising private housing (56%), subsidised rental flats (29%) and subsidised sale flats (15%). For the same period, there were 2.6 million households. 

But the combination of reduced vacant properties and other factors such as the low interest rate and demand from foreign buyers have helped fuel a shortage. One solution could be increasing plot ratios. 

Plot ratios have traditionally been higher on Hong Kong Island and Kowloon than in the new towns in the New Territories. This was because the former two were supported by essential infrastructure. 

However, with the extension of public transport networks and the well-established infrastructures currently available in both urban areas and new towns, the Government could be more resolute in increasing plot ratios in the latter. 

Public housing estates, for example, are often 40 storeys high, based on a plot ratio of 6.5. Given that traffic congestion is less likely as estate tenants rely mainly on public transport, it follows that a higher plot ratio for public housing estates could be considered.

 

Ageing-in-Place

Whatever the solutions that are adopted to address Hong Kong’s land supply issues, these will have to cater to the inexorable rise in demand over the coming decades due to a rapidly ageing population.

In 2018, the number of elderly people aged 65 and above accounted for 18% of the city’s total population and is expected to rise to 26% in 2030. Subsequent years will also see an increase in the number of elderly-only households, which are expected to occupy 20% of total housing stock by 2021. 

The public and private sectors should keep in mind that housing is often tied to health and productivity issues. While it is crucial to identify land available for housing supply, it is equally important to address housing-related challenges like an ageing population. 

If the Government wishes to carry out its Ageing-in-Place Scheme effectively by promoting elderly well-being and avoiding premature institutionalisation, the importance of affordable housing cannot be underestimated.

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