We don't really need an international survey to tell us that Hong Kong's property prices are among the highest in the world. But one recent study, which has been called the 'gold standard' for assessing housing affordability, says the city's homes are 'severely unaffordable'.
According to Demographia's international housing affordability survey, Hong Kong has the most unaffordable housing compared with major metropolitan areas in the US, Britain, Australia, Canada, Ireland and New Zealand.
The study rates housing affordability by using the 'median multiple', that is, the median house price divided by gross annual median household income. It pointed out that, up until the third quarter of last year, Hong Kong's median house price was HK$2.58 million, 11.4 times the median annual household income of HK$225,400 - ahead of the other major cities surveyed.
According to the survey, for housing markets to rate as 'affordable', prices should not exceed three times the median gross annual household income. They are 'moderately unaffordable' at or below four times the income level; 'seriously unaffordable' at or below five times the level; and 'severely unaffordable' above five times the level. It shows how painfully expensive our property prices are.
In fact, by employing a similar method of calculation, local property analysts have come up with a so-called 'pain index' to measure housing affordability. They found that the median house price in the primary market is about 40 times the median annual personal income. Even in the secondary market, the 'pain index' is shockingly high - at 19 times the median annual personal income.
Some may say that these figures are a bit of a joke and do not reflect reality. Some critics and academics have even tried to defend the city's high property prices by using the shortage of land supply as an excuse. They said that, on average, about 10,000 private flats have come onto the market every year over the past few years, which is insufficient to satisfy growing demand. Some even claimed that the monthly mortgage payment for an average family is less than half the total household income, which is reasonably affordable. What a lot of rubbish!
The problem is not the prices per se; it is the provision of housing that needs to be dealt with.
Even with a raft of tough measures last year, the government was unable to curb rising prices and speculation. Other major cities, such as Vancouver and Sydney, are also grappling with affordability issues.
Rising demand will always push up prices. When Hongkongers emigrated to Canada and Australia, property prices rose there. Now, the tables have turned; people from the mainland are rushing into our market and inflating prices to unattainable levels.
Just increasing the supply of land and flats will not address our housing crisis. Prices will remain high as long as our government relies heavily on land tax revenues. The fact that property developers mostly focus on producing luxury housing adds to the problem. But it's understandable because, given the high land prices, they have to develop expensive properties.
Buying property is a reliable investment in the long term. To provide a stabilising force for our society and its development, the government must have a sustainable, long-term housing policy that divides the market into private and public sectors.
On the one hand, it should resume the sale of subsidised public housing and increase the supply of public flats. On the other, it should let the market decide the prices in the private sector. That way, everybody gets what he or she can afford.
Albert Cheng King-hon is a political commentator. taipan@albertcheng.hk