Living in a “shoebox” takes on a whole new meaning in Hong Kong. Roughly eight months ago, a micro apartment in the plush Mont Vert II development in Tai Po on the outskirts of the city was priced at HK$1.4 million (US$178,657).
For that large chunk of change, you would be the proud owner of 165 square feet or 15.4 square meters. To put that figure into perspective, 430 tiny flats could be jammed on to a standard football, or soccer, field of 76,854 square feet or 7,140 square meters.
Similar properties at similar prices were heavily advertised online and at traditional real estate agents during the same period. In this ‘crazy town’, there were no shortage of buyers.
“The problem of skyrocketing property prices has dragged on for 20 years, and the government’s policy to curb house prices has not worked,” Andy Kwan Cheuk-chiu, who runs ACE Center for Business and Economic Research, a Hong Kong think tank, told Asia Times.
“The government has no political determination – they are afraid of offending the powerful rural leaders to retrieve the lands. Moreover, the government’s property cooling measures have distorted the market.”
In turn, this has triggered a surge in building smaller apartments, which has stoked spiraling prices as supply fails to meet demand.
Again, a “micro home” at One Prestige in North Point, developed by Chun Wo Property, went on the market at HK$3.9 million last year. The apartment was located near the heart of the financial district in Central and set a record as the smallest flat on Hong Kong island in September 2016.
“Flats become smaller and very expensive,” Kwan, a former Associate Economics Professor at the Chinese University and a founding member of the Hong Kong government’s Long Term Housing Strategy Steering Committee, said.
“The Hong Kong Monetary Authority’s mortgage loan policy is too tight on the minimum downpayment, with homebuyers having to pay over 50% of the property value, making it difficult for people to buy homes,” he added.
But it is not just government policy which is driving sky-high prices, business professionals, analysts and academics have pointed out. Part of the problem is that the market is dominated by a “cartel” of mega-rich property developers, who are sitting on large pockets of land.
In November, the Kwoks were ranked third in Forbes magazine’s list of Asia’s richest families with an estimated net worth of $40.4 billion. They control Sun Hung Kai Properties, one of the big three developers in the city.
As for the other two, Henderson Land is run by Lee Shau-kee, while CK Property is controlled by the legendary Li Ka-shing, who is known locally as “Superman” because of his Midas touch. He is due to step down in May after building the company from scratch.
Lee’s family had estimated wealth of $29 billion, according to Forbes, while Li’s private fortune was around $34 billion.
Significantly, these aging tycoons are behind property juggernauts which hold more than 750 hectares of land reserves in rural areas in the New Territories, the suburban districts of Hong Kong, public records showed.
“As I see it, there are two overarching but interconnected problems: 20 years of increasingly dysfunctional government and the paralyzing greed of the property developers,” Neville Sarony, a practicing QC in Hong Kong and a former Professor of Law at the City University of Hong Kong, told Asia Times.
“To be labeled as the city with the most expensive real estate in the world is hardly consonant with competitiveness. Pushing property prices ever upwards strangles competition so far as Hong Kong people are concerned. The competition only exists between mainland [Chinese] purchasers vying amongst themselves.
“Not only has this pushed property prices higher but a high percentage of the flats are held as investments and are not even occupied. Walk past Cyberport’s Bel-Air [luxury development] at night and count how many lights are on?” he continued.
“Our home-grown property tycoons have no intention of allowing this cascade of money to cease flowing into their pockets. The size of the flats they are building are diminishing in tandem with the increase in the price per square foot,” Sarony, who has contributed articles to Asia Times, added.
Naturally, there is an argument that mainland investment in the residential real estate sector has had a positive effect on the Hong Kong economy.
Land sales are the cornerstone of the government’s policy and a major revenue spinner. Earlier this month, details emerged that 27 residential and four commercial sites would be sold this year, bringing in at least HK$170 billion, real estate analysts have projected.
Most of the plots are in Kowloon, across the harbor from Hong Kong, and in the New Territories. More than 15,000 private flats are expected to be built, adding to an overall total of 25,500 in 2018.
“Foreign buyers, mostly mainland [Chinese buyers], have accounted for less than 10% of total property sales since 2012,” Shih Wing-ching, the founder of the Centaline Property Agency, which is one of the largest in the city, told Asia Times. “Our housing crisis is a result of government policy that makes land supply inadequate.
“Only 25% of our land has been developed, and of this, only 7% has been used for housing. As for ‘foreign’ buyers, including people from mainland China, they must pay a 30% stamp duty after it was introduced by the government in 2016 to cool down prices,” Shih, who is also a member of the Housing Authority, added.
Indeed, finding the right balance has proved elusive. Apart from Hong Kong’s young professionals struggling to even reach the property ladder let alone gain a foothold on the bottom rung, the authorities’ public housing policy has been described as a shambles.
During the past few years, supply has been squeezed, leaving low-economy families struggling to find affordable accommodation with 210,000 people now living in “subdivided flats” or tiny cubicles.
Up to 280,000 households are still waiting for their applications for government apartments to be processed, Ho Hei-wah, a veteran social activist and the director of the Society for Community Organization, stressed, adding that the list was growing by about 30,000 each year.
“High property prices are a government failure. During the Donald Tsang era, the [authorities] cut housing and land supplies,” Ho told Asia Times, referring to the former Chief Executive of Hong Kong between 2005 to 2012.
“For a few years, the government did not sell land. They also reduced the provision of public housing – including government flats and subsidized housing – from 50,000 units per year to 15,000 units per year,” he continued.
“The situation is so serious, it means the government will not be able to deal with the housing problem in the next five to seven years,” Ho, who is known as the “Voice of the Poor” and named by Time magazine as one of the 25 most influential people in Hong Kong, added.
Until these problems are addressed, micro-apartments will continue to shrink. In less than a decade, they will probably be the size of sandwich boxes. Not, an appetizing thought.