Reflecting On The Blame Game In Housing Affordability...

[walkup]

A refreshing article IMHO.......

A house is not a home until it becomes affordable
Rather than blaming developers, non-local buyers and the US Fed for high property prices, government should focus on how to make HK people rich
George Chen SCMP Mon March 4

George Chen is currently the financial services editor at the South China Morning Post. George has covered the financial industry since 2002 for Reuters and other media outlets. Shanghai-born and Hong Kong-based George is the author of Foreign Banks in China. He muses about the interplay between the two financial centres in Mr. Shangkong columns.

A house is not a home until it becomes affordable
Property prices are one of the hottest topics in Hong Kong these days. Everyone seems to have a strong opinion, although many have lost sight of the real issue.

There is nothing wrong with the real estate industry growing in an international city like Hong Kong. And there should also be nothing wrong with the level of property prices - whether in the current uptrend or in the downtrend during the Asian financial crisis.

Hong Kong has been proud of being a free market for generations, and that is one of the things that makes the city different from the rest of China.

People make their own decisions whether to buy or sell. There are profit-takers, and there are also risk-takers.

If every detail must come under the government's control, that is a recipe for a planned economy.

There is something wrong with the way the question about property prices in Hong Kong is asked. It's always: "Are they too high?"

The real question most of us miss is how the government can ensure people can better afford to buy property.

Public housing is one way to allow more ordinary people, in particular those with low incomes, to obtain their first homes. For other people, the property problem the Hong Kong government is facing is no different from that elsewhere.

It is, in fact, a problem of employment and economic growth: how much money do you need to earn to be able to afford to buy your first home at a given price level?

That is the issue underlying the question whether the city's property prices are cheap or expensive. How cheap is cheap? And how expensive is expensive? A hundred people will give 100 different answers.

I grew up in Shanghai. When Starbucks and Pizza Hut first opened their shops in Shanghai more than a decade ago, I was studying at university.

A cup of Starbucks latte cost something like 10 yuan, a luxury for students at that time. Many young Shanghainese would take their boyfriends and girlfriends on dates to Pizza Hut, which was considered a decent restaurant about 10 years ago rather than just another fast-food place.

Today, the same cup of Starbucks latte costs about 30 yuan (HK$37.30) and it is no longer a luxury but a daily necessity for some students.

How much has Starbucks raised the price of its coffee over the past decade? About threefold.

How much have Hong Kong's property prices gained since 1997, when they last peaked? Of course, coffee and real estate are two very different things, but few people would try to politicise the coffee price by blaming mainlanders in part for buying too much - nor would the government attempt to do so.

People on the mainland can certainly afford to buy a great deal more today than they could a decade ago, thanks to their increasing incomes, which are catching up rapidly with Hong Kong levels.

Rather than blaming developers, non-local buyers and the money-printing US Federal Reserve for high property prices, the Hong Kong government should focus on how to make Hongkongers rich in the big wave of global economic rebalancing over the next few decades.

[Skyhook]

[jgl]

Maybe it's me, but that article seemed to be almost completely devoid of any real information. More of a waffle piece.

What's it actually saying? I suspect it's summed up in the opening paragraph and even then the rest of the article doesn't explain how.

[Football16]

Maybe it's me, but that article seemed to be almost completely devoid of any real information. More of a waffle piece.

What's it actually saying? I suspect it's summed up in the opening paragraph and even then the rest of the article doesn't explain how.

It is a generational thing I guess. So many today do a quick scan and conclude the opposite.

There is no waffling here - his key points are stated up front, in the middle and as a conclusion.

It is, in fact, a problem of employment and economic growth: how much money do you need to earn to be able to afford to buy your first home at a given price level?

Rather than blaming developers, non-local buyers and the money-printing US Federal Reserve for high property prices, the Hong Kong government should focus on how to make Hongkongers rich in the big wave of global economic rebalancing over the next few decades.

--


It is to me the conundrum facing HK who profess to have a goal of maintaining their culture, language and traditions but who are presiding over a falling birth rate as people have few or no children and a key factor is housing costs.

All the tinkering to cool the market does not work and in fact these things end up deterring first time buyers - the very group who will - if they can afford it - reproduce.

The problem is that this stuff is easier said than done but for me the education of HK youth needs major improvements as well as help new sectors of economic growth develop with policy support and R&D in the right sectors that could employ their people in better paying jobs.

But this problem is now ugly for youth in the west these days and gov'ts keep thinking a recovery will just appear out of nowhere - but it isn't.

[jgl]

I think this was the main point:

Rather than blaming developers, non-local buyers and the US Fed for high property prices, government should focus on how to make HK people rich

The rest of it was fairly meaningless to me. Especially the weird example of Starbucks where he doesn't give dates for his different prices, and overlooks obvious things like Starbucks not being a sensible part of a CPI basket in Shanghai decades ago (or even now). That's just ludicrously sloppy writing.

Poor writing in supposedly reputable publications is a pet peeve of mine. Admittedly, calling the SCMP 'reputable' is pushing it. I mean, look at these lines of inane, space-filling tripe:

People make their own decisions whether to buy or sell. There are profit-takers, and there are also risk-takers.
A hundred people will give 100 different answers.
Hong Kong has been proud of being a free market for generations, and that is one of the things that makes the city different from the rest of China. (Bollocks, it's an oligopoly)

Anyway, if everyone in Hong Kong becomes 'rich', where does that leave Hong Kongers with regards to property if supply remains limited. I've been reading about Australia recently and how it's now one of the most expensive countries in the world in which to live. In the big cities there is very high quality of life, very high housing prices and general cost of living, but still property seems more affordable to most people (and certainly much better value in terms of quality and space).

Though even with the Australian example, it's interesting to see that the market there has been distorted with an influx of money from China.

[Lootoo]

Maybe it's me, but that article seemed to be almost completely devoid of any real information. More of a waffle piece.

What's it actually saying? I suspect it's summed up in the opening paragraph and even then the rest of the article doesn't explain how.

No, it's not just you. Most native English speakers would probably read that "article" the same way you did. It is puzzling why some people seem to believe that stating a premise and concluding with the same premise is somehow considered a valid argument (all the while tossing out breezy platitudes and ignoring the inconvenient facts you have mentioned)...

[JT06]

if everyone in Hong Kong becomes 'rich', where does that leave Hong Kongers with regards to property if supply remains limited.

Totally agree. The writer doesn't seem to understand the simple rule of demand and supply. If everyone becomes "rich", demand for properties (and more living space), will go even higher. If supply remains static, then the prices will just go up so that only those very rich can afford them - market's mechanism of distributing scarce resources.

[jgl]

Totally agree. The writer doesn't seem to understand the simple rule of demand and supply. If everyone becomes "rich", demand for properties (and more living space), will go even higher. If supply remains static, then the prices will just go up so that only those very rich can afford them - market's mechanism of distributing scarce resources.

Yeah, that's such a fundamentally obvious point that I think that the writer has some mysterious definition of 'rich' that doesn't mean 'have lots of money'. Possibly 'rich' means 'can have a nice affordable place to live' but I'm not sure how that's supposed to happen with constrained supply.

[methosb]

I suspect that for many they don't look at housing the same way as stocks. When you purchase an apartment you get something physical, usable and necessary for your money which causes you to compare it with the price of other physical things and necessities, but the maths just doesn't work out. You look at what you have, what your money could buy you, then you look at how much it will cost to buy this crappy little box for you to squash yourself and your stuff into and at some point you just go "this is not worth the price".

Maybe you can buy manure, maybe you can use it to fertilise your garden, and maybe it is the only manure available so people will pay big money for it, but at some price point you are going to look at it and see that it is just horse crap and decide that it is not worth it.

From the point of view of the writer he just sees property as stocks, they go up and down, some people make money, some people lose money. The property has no material value to him, it might as well be piles of manure. Other people actually want to buy places to live in, and those people see the material value of the property and think that the asking price is too high compared with the cost of everything else around them.

Besides, does he think that if everyone's wages doubled somehow the property prices would just stay the same and let the wages catch up?

Not that I think that the government's policies so far actually help.

[Football16]

Wow!!!! So many conclusions from a one point article.

Reminds me of the 6 blind guys and the elephant.

A house is not a home until it becomes affordable
Rather than blaming developers, non-local buyers and the US Fed for high property prices, government should focus on how to make HK people rich
George Chen SCMP Mon March 4