As some Hong Kong homeowners are finding out, you can’t charge for something that is given away for free.
Keen to provide affordable homes for the poor, Chief Executive John Lee vowed during his maiden policy address last year to cut the waiting time for public housing from six years to 4.5 by 2027. For that to happen, his administration intends to build around 30,000 temporary housing units and therefore increase the total production by about 25%. Kai Tak will make up a big chunk of that burden.
This surprise announcement was met with a residents’ petition and threats of protests. Under the so-called “light public housing” scheme, monthly rent for units measuring 330 square feet will cost, at most, HK$2,650 ($338). Flats of similar size at The Henley, a nearby luxury complex developed by Henderson Land Development Co., can go for HK$15,000. There are even fancier buildings in the area. Pano Harbor, which promises panorama views of Victoria Harbour, recently sold a 2,088-square-foot unit for over HK$95 million, according to the government’s land registry. The transaction value was most likely agreed on before the public housing announcement.
Aside from the nuisance of commuter crowds and traffic jams, Kai Tak residents worry their home prices will nosedive. Spooked developers might also rush to sell existing stocks and offer juicy discounts and rebates if necessary. More than 10,000 units from 17 new projects can come to flood the market this year, according to estimates from Bloomberg Intelligence.
After all, Hong Kong’s builders have already started resorting to price cuts to boost their sales. Earlier this month, CK Asset Holdings Ltd. slashed its offerings by as much as 18% at Seaside Sonata in Cheung Sha Wan. The developer is now Kai Tak’s largest landlord after winning a land bid in December for the lowest price since 2014.
Kai Tak was designed to rival the Central business district on the island side, with promises of grade-A office towers, high-end department stores and luxury residential complexes. Infrastructure delays and cancellations, such as ditching a decade-old government proposal for an elevated rail link, already curbed homebuyers’ enthusiasm. Placing public housing next to luxury complexes — even for just seven years — is the last straw. Is this a prelude to further changes to the Kai Tak development plan?
It’s curious why the government chose Kai Tak in the first place. Granted, social housing needs to be close to public transportation, otherwise people would prefer to stay in their subdivided apartments for easier commutes. But with the Chinese border reopened and business sentiment picking up, Lee’s administration could have chosen a less prime location for public housing, and waited for better bidders for the Kai Tak parcel instead.
For instance, an adjacent smaller plot, also for commercial use, was sold in 2017 for HK$24.6 billion. That’s a lot of money. The 30,000 temporary social housing flats the government planned over the next five years cost an estimated HK$26.4 billion.
Lee’s enthusiasm for social housing is already changing the landscape of high-end residential real estate in Hong Kong. Apart from building next to expensive complexes, the government also insisted on plans to construct 12,000 public flats on a luxury golf course. Real estate agents worry that in the future, developers might get more conservative in land bidding — not just in Kai Tak but in other areas, too, because of the government’s lack of commitment to earlier plans. Some now advise potential buyers to look at locations less accessible via public transportation, such as the Peak and Repulse Bay.
Granted, the new administration’s attempt to solve Hong Kong’s housing problem — it is one of the world’s most unaffordable cities — is admirable. Perhaps the government hopes that one day, Hong Kong can realize Chinese President Xi Jinping’s dream of common prosperity, and that the rich and the poor can live side-by-side harmoniously. But sadly, owning a $10 million luxury apartment means you do not want to be common. Rich people do not want to see public housing projects out of their kitchen windows or when they play golf.
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Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder.
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