Economic Conditions in Hong Kong Should Persuade Chinese Government to Boost Affordable Housing Across the Country.

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Economic Conditions in Hong Kong Should Persuade Chinese Government to Boost Affordable Housing Across the Country.

August 05, 2019 | Report

Premise: The economic conditions that underpin youth restiveness in Hong Kong should persuade the Chinese government to boost affordable housing across the country.

There are many reasons for unrest in Hong Kong. Economics is an important one that rarely features in the media.

Assuring the means for people to afford a house and build savings is part of the basic economic model of rich countries. Demographia has named Hong Kong the world’s least affordable housing market for nine years in a row. According to Hong Kong’s Midland Reality, average property prices have risen almost five times since their trough in 2003. It costs a median Hong Kong family 19.4 years of gross pre-tax income to buy an apartment. That’s up from 11.4 years in 2011 and it’s much higher than anywhere else in the world. In Sydney – the second least affordable – that multiple would be 12.9.

This pricing growth has been driven by an influx of money, primarily from mainland China. The M3 money supply in Hong Kong is four times today what it was in 2003. Since Hong Kong doesn’t run an independent monetary policy but pegs the HKD to the USD, it just supplies as much currency as demand requires.

In the five years to 2017, the wide measure of money M3 nearly doubled in China. In the eight years to 2017 it nearly tripled. As the money supply has expanded in China and loans have made mainlanders cash-rich, some has been taken to Hong Kong and invested in property and equities.

Excessive money supply expansion has created the same conditions in major cities in the mainland. According to CBRE, the average price of a house in Shanghai is now more expensive than Los Angeles, New York or London. In Beijing and Shanghai, the young educated migrants of the media-termed ‘Ant Family’ pack themselve