Non-Breaking News: Hong Kong's housing is the most unaffordable in the world.
Studies have shown time and time again that Hong Kong tops the world's charts in terms of housing prices. Sydney, Vancouver, and Auckland commonly top the charts just below Hong Kong, but there is still a significant gap between those cities and the city-state.
Let's say you have spent years scraping by on every dollar and cent, and you finally saved enough for the 20% down payment to purchase that $5-million flat. You finally found your dream home – 300 square feet open-concept unit, the bedroom converts into the living room and the bathroom is also the kitchen. The unit faces the barren hills and the future site of an industrial garbage incinerator, and it only takes you an hour and a half of bus and MTR to commute to work. You gleefully sign all the documents at the lawyer's office after putting down that one-million-dollar cheque. That's when you realize something is wrong – you don't even own your home. You've purchased a leasehold, with the lease set to expire in 2047.
You are concerned, so you ask your lawyer, "What happens after 2047?"
You are more agitated now, and repeat, "Tell me what happens after 2047!"
"Well," he stutters slowly, unsurely, "Since the government owns the land, they can technically take it away. Nobody really knows, and there are no specifics. They can charge you to extend the lease..."
"How much will that cost me!?" You have to interrupt. "I don't want to commit $5 million to essentially rent a place, only to further pay an unspecified amount down the road. This is insane!!"
"Well, you just signed the papers, so you can't back out now. Sorry, but I have to meet my next client now. They also bought a home in your neighbourhood too." He replies nonchalantly.
He gathers his documents and walks out. Just before he leaves, he turns around and says, "Oh, congratulations on owning your home."
Unfortunately, current studies on housing prices does not fully reflect Hong Kong's bizarre and disturbing housing reality. Article 121 of the Basic Law states, "As regards all leases of land granted or renewed where the original leases contain no right of renewal, during the period from 27 May 1985 to 30 June 1997, which extend beyond 30 June 1997 and expire not later than 30 June 2047, the lessee is not required to pay an additional premium as from 1 July 1997, but an annual rent equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter, shall be charged."
And Article 123, "Where leases of land without a right of renewal expire after the establishment of the Hong Kong Special Administrative Region, they shall be dealt with in accordance with laws and policies formulated by the Region on its own."
With ambiguities surrounding the leases of land after June 30th, 2047, homebuyers are purchasing the right to the property only until 2047. This is unlike Sydney, Vancouver, Auckland or other jurisdictions in liberal democracies, where housing options are mostly freehold, meaning that a homebuyer has indefinite ownership of the property. Although leaseholds do exist in these markets, these homes are sold at a significant discount to take into account the costs of extending the lease, or the potential risk of the government not extending the lease. The closer the lease is set to expire, the greater the discount of the home.
This is not the case for Hong Kong. All properties in Hong Kong are leaseholds, with the leases set to expire in 2047. And as Hong Kong citizens know all too well, there certainly is no discount.
Owning a home in Hong Kong is not only unaffordable, it is impossible.