Hong Kong'S Property Prices Have Soared Nearly Four Times In 15 Years, And The Home Ownership Ratio Has Reached A New Low In 20 Years

Hong Kong's property prices continue to be high, and the dream of home ownership is beyond the reach of many young people.

The Hong Kong Legislative Council Secretariat published a research brief on "the impact of home ownership on Hong Kong's socio-economic development" on March 1. According to the research brief, only 7.6% of the owners of home ownership are under 35 years old, and the average age of first-time home buyers has reached 44 in 2019.

According to the research brief, property prices in Hong Kong rose nearly fourfold in the 15 years from 2004 to 2019. However, the home ownership ratio fell to a 20-year low of 49.8% in the same period. Although the data rebounded slightly to 51.2% in the fourth quarter of last year, it was still below the 2004 high of 54.3% and far below the average of more than 60% in rich economies.

Against the background of serious land shortage and declining home ownership ability, the proportion of the younger generation under 35 years old in the overall home ownership households dropped from 22.1% (198100) in 1997 to 7.6% (98200) in 2019.

According to the report, it is difficult for young people in Hong Kong to catch up with the rising property prices on the basis of their working income alone, and they do not have enough financial resources to compete with other buyers in the property market. It is learned that the difficulty in home ownership is one of the sources of hopelessness among the young people in Hong Kong. In terms of property prices from 2004 to 2019, the figure has soared by 391%. However, the median monthly income of households in Hong Kong has only increased by 78%, far behind the rise in the property market.

At the same time, the proportion of elderly people aged 60 and above accounted for 41% (536000) of home owners, becoming the main force of home ownership, which doubled from 21% (192100) in 1997.

Proportion of self owned property "inverted U"

In fact, the home ownership ratio in Hong Kong has developed in an inverted U-shape over the past 23 years. The report points out that the ratio soared from 46.7% in 1997-2004 to the highest of 54.3%, then stayed at the level of about 53% until 2011, but then fell back to 49.8% in 2019 and 51.2% in the fourth quarter of 2020.

According to the data, from 1997 to 2004, about 62000 residential units were completed annually in Hong Kong. Ample supply, coupled with a 52% drop in property prices triggered by the Asian financial turmoil, provides a rare opportunity for first-time home buyers. During 1997-2004, there was a net increase of 264000 households in the number of home ownership households, of which about half were private housing.

It is worth noting that the number of households in Hong Kong increased by 354000 during 1997-2008. During this period, the number of home ownership households increased significantly by 337000, while the number of tenants increased by 47000. The proportion of tenants was only 13%. This was mainly due to the abundant supply of housing and the affordable price. This means that 1997-2008 can be regarded as the best "boarding" window for the property market in Hong Kong.

Since then, the SAR government has continuously tightened the supply of land and housing, and has launched a series of policies, including stopping land auction, abandoning the digital target for home ownership, reducing the scale of new land development through land reclamation and land leveling, and indefinite suspension of construction to subsidize the sale of houses.

These measures have led to a precipitous decline in housing supply in Hong Kong, which is driven by the economic recovery. Property prices in Hong Kong have rebounded sharply during this period, making most wage earners helpless to become renters. During the period 2009-2019, the total number of households in Hong Kong increased by 335000, while the number of home ownership households increased by 80200. However, the number of tenants living in public or private housing has soared by 250000, accounting for nearly 75%.

Wealth effect of property market

With the continuous prosperity of the property market, home ownership has become an important source of wealth for wealthy families.

According to the statistics of the rating and Valuation Department, it is roughly estimated that the market value of private residential properties in Hong Kong has tripled to about HK $12 trillion from 1997 to 2019, which is higher than the 109% growth of GDP in the same period. In 2019, the total value of private residential property in Hong Kong will be about 4 times of GDP, much higher than 1.6 times of that of the United States. The report points out that the wealth effect brought about by changes in property prices can have a significant impact on domestic consumption and GDP.

In order to help the younger generation buy their own homes for the first time, there have been many initiatives to increase the supply of land and housing in recent years. With reference to the development experience during 1997-2004, when the supply of housing is sufficient, the price of property can fall back to affordable level and the home ownership ratio will rise significantly.

According to the latest progress report of the long term housing strategy issued by the SAR Government in December 2020, after changing the ratio of public and private housing from 60:40 to 70:30 in 2018, the target of private housing construction in the next 10 years from 2030 to 2031 will be only 12900 units per year, which is lower than the actual average annual housing production of about 13500 units in the past 10 years, and the housing supply is still very tight.

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