HONG KONG: When analysing any problem, there are always obvious facts that everyone knows, as well as obscure facts that are less than obvious but actually reveal more information on root causes. Most Hongkongers have probably become numb to news reports of record house prices, given our acute awareness of the real struggles in climbing the housing ladder (“Hong Kong home prices surge to all time high in January”, February 28). Yet the obscure fact behind Hong Kong’s housing prices is that it’s caused not by poor housing policy per se but by an over-reliance on real estate for government revenues.
Indeed, government revenues from real estate-related contributions (land premiums, stamp duties) have been consistently high (about 20 to 30 per cent of total revenues). Likewise, the profit margins of real estate developers have actually remained relatively stable in the past few years despite rising housing prices, both because of rising construction costs and, more importantly, rising land premiums imposed by the government. Given that government expenditure is forecast to increase over time due to an ageing population, it’s no wonder that there’s a genuine worry about our fiscal sustainability.
Addressing rising housing prices requires a two-fold consideration. The first is to increase affordability by increasing public housing supply, such as through the “rent-to-buy” home ownership scheme that Professor Richard Wong has written extensively on in his column for the Post. But, beyond that, the second consideration is a need for an active rethinking of government finances. Our challenge is in the need to diversify tax revenues while also keeping our competitive advantage as a low-tax environment.
Policies such as introducing government service taxes are politically hard to push, but worth thinking about again, given that this would preserve our low corporate/profits tax advantage. The other strategy is to place the tax burden on discretionary spending rather than essential living expenditures. It’s easy for many Hong Kong youths today to feel that their life purpose has simply become climbing the housing ladder. But we owe it to ourselves to aspire to something more. It’s only by addressing home ownership that we can truly create a greater narrative of aspiration that we so deeply long for.
