The world’s second most expensive apartment isn’t in New York or Paris or Berlin, or even Tokyo. It’s in Hong Kong, where Asia’s priciest living space and the second most costly in the world, after One Hyde Park, in London has gone on sale. The apartment, a 6,755 square foot unit at the 12-unit Opus building in downtown Hong Kong, has sold for HK$430m – US$55m. That’s a price of US$8, 130 per square foot.
Obviously, that’s a huge price per square foot and a huge apartment too. But Hong Kong is an expensive place to live even if you’re not shopping for an Opus-style apartment. The average Hong Kong apartment is 600 square feet, a much more modest proposal. But buyers can still expect to pay HK$4.5 million for such a place – US$580, 135. Compare that with Brooklyn heights, now one of the world’s stiffer-priced neighbourhoods, where New York centred blog Curbed.com found one couple paying US$1500 a month for a 240 square foot apartment, and it doesn’t seem so bad. But Hong Kong’s prices are for family homes and the figure is an average across the city: New Yorkers willing to live in Ridgewood, or East Williamsburg, can hope for significantly lower rents.
But both major cities face similar pressures. As a result of being key areas in their countries’ economies, there’s a premium on living in them. The average Honk Kong income is HK$20, 200 pcm. For two working Hong Kong residents to buy an apartment, then, they’d have to spend 18.6 years’ worth of salary, without spending a penny on anything else. That’s in clear contrast to the rest of Asia, where prices are typically much lower. Singapore households are typically looking at between three and seven years to pay off their property purchases , less than half Hong Kong levels. Yet in the US, both would be considered out of reach: affordable’ there means three years or less.
As the housing market across Europe and American crashed hard after 2008, Hong Kong experienced the opposite. Prices began climbing in the first quarter of 2009, quickly passed the levels of 1997, the previous market peak, and have risen quarter on quarter since then; a record every three months. But incomes have not kept pace. Average pay has risen by 15% in the same period as property prices have shot up 85%. The result has been a ‘sandwich class,’ earning between HK$20, 000 and HK$30, 000; for these people to enter the property market, prices would have to fall by between 19% and 30%, according to Li Xueying Asia News Network (MCT).
Hong Kong faces a housing crisis in the making. But it’s less like the US of 2008, where prices fell vertiginously, and more like the US now, where prices are rising but wages aren’t. Some attribute this to mainland Chinese buying Hong Kong property: Mainlanders account for 40% of luxury home sales but only 10% of total home sales, and Hong Kong’s Chief Executive Leung Chun Ying has announced a law to bar foreigners from buying private housing, with the Hong Kong government in the process of figuring out the details.
Mr. Leung is thought to have made the move partly to deflect criticism from his rivals for having failed to combat the housing shortage since his election two months ago: however, the first result of his action has been a tumble in the Hong Kong stock market. Meanwhile, academics have criticised the vagueness of the measure, which Mr. Leung is keeping sufficiently nebulous as to discuss neither the law itself, saying only that the government was drafting the legal framework, or its date of enactment, which he said would be ‘when necessary.’
In fact one major driving force of Hong Kong’s housing shortage is the lack of housing: 5, 000 too few homes a year for the last six years and a projected shortfall of 185, 000 homes by 2017, according to Eva Lee of investment bank UBS. The other is the Hong Kong government’s lack of control over its own interest rates. The Hong Kong currency is pegged to the US dollar, forcing officials to follow a monetary policy tailored to a totally different situation. The Federal Reserve’s attempts to rekindle the US economy are seriously inappropriate to a market that’s more in danger of overheating than going out.
If home prices continue to be the political flashpoint they are already developing into, the question is whether Hong Kongers will vent their unhappiness – supposedly on the increase on mainlanders, or whether they’ll rally behind the cry -˜the rent is too damn high!’