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Life Bound by Cages—Hong Kong’s Housing Crisis

The period from 1839 to 1842 was one of bitterness between China and Britain, as China shut down the highly profitable trade of Indian opium which was carried out via British ships. This bitterness was only exacerbated by China’s ever-present deep-rooted hatred against outsiders, resulting in its adamant demands to keep interactions to a minimum. When the time came, it wasn’t a surprise that there was an inevitable clash between the West’s traders and the then ruling Qing dynasty, culminating in a humbling of the Chinese.

What took China by shock was British Captain Charles Elliot’s annexation of the then barren island of Hong Kong. It baffled the Chinese that he chose to occupy a piece of seemingly useless land over other strategic and larger islands at the mouth of the Yangzi river up north. Yet, there was an advantage that not many had the eye to see. Consisting of two main islands (the Hong Kong Island and the Lantau island) and the main hinterland, this supposedly barren land shaped itself into a natural geographic port with a deep harbour which sheltered it from most weather conditions and possible attacks, leading to the steady growth of the settlement.

Meanwhile, The West initiated further incursions against China, earning itself three square miles of Kow-loon under the convention of Peking in 1860. Towards the end of the century, in 1898, it forced China to cede the New Territories, which formed major swathes of modern-day Hong Kong, under a 99-year lease.

Hong-kong, from Kow-loon

Here onwards, Hong Kong settled itself into a steady decline following the rise of Shanghai as an avenue for economic expansion. During World War II, the dying colony fell to Japanese attack. After this, though, things started looking up for Hong Kong and its residents.

Britain had to return Hong Kong to China’s Chiang Kai-shek due to constant pressing by America. But the colony that was returned to the Chinese was a mere shadow of its glorious past. It took the Communist Party’s victory in China’s Civil War in 1949 to finally turn the tables as the Capitalists of Shanghai flew to Hong Kong to set the territory on paths of prosperity. Soon, it transformed into a manufacturing and trading base, endeavours which were further aided by China’s own Economic advance.

Finally, the 99-year-old lease expired in 1997, and Hong Kong had a high degree of autonomy, despite being under the Chinese government, and it has since weathered the many financial crises. Today its economy is more robust than ever and it has held on to its reputation of being an economic hub, being ranked as the number one city on basis of economic freedom.

Image Courtesy: todayonline.com

This, however, comes with a cost.

Hong Kong has earned the distinction of being an incredibly unaffordable city to live in. In a scenario that highlights the disparity like none other, the rich have real estate while the rest simply do not. Home-ownership is a far-fetched dream for many Hong Kong dwellers, one that is beginning to enter a stratum beyond the realm of possibility of most.

According to recent statistics, an average resident requires 19.4 times his median annual salary to purchase a mere space in the city, not objectively much larger than a prison space, in a towering skyscraper. In simple words, even said person sets aside a third of his income for his living space, it would take him about 60 years to pay off the purchase.

A lot of factors have converged to skyrocket Hong Kong’s housing prices, awarding it the title of having the worst affordability in Demographia’s ranking. And surprisingly, being small and densely packed doesn’t come at the top of this list.

According to the Demographia Housing Affordability Analysis, Hong Kong is the least affordable, with a Median Multiple of 19.4 up from 18.1 from 2017.

In fact, the reason that leaps to the top is the very thing which gives Hong Kong its character—its tax-haven reputation. Boasting of mind-boggling policies allowing no taxes on exports, capital gains, and dividends to having flat low rates of interest senselessly tied to US interest rates, and coupling it with simple tax frameworks has meant that the city doesn’t really get much revenue from the wealthy western companies which offload their handsome profits there. This leaves the government with no other choice than to search for other avenues, namely land leases and auctions.

The government leases plots in auctions for long periods of time (commonly 50 years) instead of outright selling them. These auctions in-turn inevitably lead to ego clashes between the various Chinese mainland developers, who end up paying astronomic prices for the plots, case in point—a plot being auctioned off at a price of 12.45 billion dollars to Wharf Holdings limited.

The rates that people have to shell out for affording a house built on land sold at such prices exceed any reasonable valuation and put the real estate economy on shaky ground. The Government has little incentive to take action to solve this crisis, as any reduction in prices would result in falling revenues and would be an attack on Hong Kong’s ‘Economic Haven’ title.

Surprisingly, land isn’t scarce in Hong Kong, with only 24% of the land available being developed. Admittedly, most of the land is rocky and mountainous but every little bit counts and the current land reclamation projects are in urgent need of being sped up.

Source: Planning Department of Hong Kong

Adding insult to injury, the government blatantly sides with the rich. For example, the Fanling Golf club is spacious enough to house many projects but it has hardly been touched or spoken about. People are instead forced to live in houses equivalent to cages with highly deplorable living conditions. Even though nano homes are being enthusiastically welcomed, they are just band-aids to cover up the leaks of the overarching problems. The citizens of Hong Kong are now forced to demand the right to have homes where arguments don’t boil over the smallest of things owing to communal kitchens and bathrooms, children don’t grow up confined in claustrophobic spaces, and the elderly don’t have to live in solitary confinement.

Hong Kong is just the worst extreme in a world where living standards are increasingly worsening. Sydney paints a similar picture. Meanwhile, the less said about living standards in New York and London, the better. In fact, we don’t have to look far from our own nation to gain perspective.

Even the prices of tiny living spaces, often as large as an average garage, are rising exponentially. In a city like Mumbai, a family of four has to go about its daily chores in a cell-sized house. This, after rigorous hours of daily commute and workplace stresses, feels like a dreadful punishment. In this race to improve, we, as a race, may be losing our time to admire the little details of life, to smile at the sunshine, to dance in the clean rain, to have a place to call home. Perhaps, in drab concrete jungles, we are burning away our fast fading humanity, getting short-changed by our very own deceit.

By Subhapratik Nayak for the Economics & Finance Society of Manipal 
Featured Image Courtesy: The National Post

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