Hong Kong

Hong Kong-Macau Bridge Usage Projections Dropped One-Quarter

Wendell Cox — Mon, 18 Jun 2018 23:35:16 -0400

Hong Kong's Transport and Housing Bureau expressed concern that the soon to open Hong Kong to Macao Bridge will fall far short of its usage projections, according to the South China Morning Post (see: "Estimates for traffic on Hong Kong mega bridge cut by up to 26 per cent because of competition, government admits"). The bridge is expected to reduce automobile travel times from four hours to 45 minutes between the two terminals, one of which (Macau) is adjacent to the large city of Zhuhai. The article did not indicate the financial impact on the project.

Officials blamed the competitive impact of a Shenzhen to Zhongshan bridge, planned to open in 2024, which will be upriver from the Hong Kong to Macau span, require only 20 minutes to cross, and will be more centrally located in the Pearl River Delta mega-agglomeration. The transport infrastructure development industry has been plagued by optimistic projections, with project sponsors often citing unforseen developments as the cause. This has been documented in research by Oxford University Professor Bengt Flyvbjerg and others.

Development Plans for Old Hong Kong Airport Announced

Wendell Cox — Fri, 21 Oct 2011 17:25:01 -0400

The government of the Hong Kong Special Administrative Region has outlined plans to create a "second central business district" at Kai Tak in eastern Kowloon, site of the now former international airport. Kai Tak airport was abandoned in 1998 when the new Hong Kong International Airport at Chep Lap Tok opened.

Kai Tak is in the middle of the most dense urban development in the high income world. The government intends that the development will have 43 million square feet of office space (4 million square meters) and will cost HK$100 Billion (approximately $13 billion).

The development would be served by a monorail, which would connect with MTR (metro) lines at Kwun Tong and to a proposed central link MTR line to the new town of Sha Tin.

Photo: Kai Tak Airport and East Kowloon (by author)

Land Use Regulation Blamed for High Hong Kong House Prices

Wendell Cox — Wed, 20 Jul 2011 23:45:26 -0400

The Wall Street Journal reports that growing concern about Hong Kong's high house prices has led the special administrative region's Chief Executive Donald Tsang to promise an overhaul of housing and land use policies in the fall.

Chou Hong-Wing, a real estate professor at Hong Kong University told The Wall Street Journal that "Hong Kong isn't short of land." Chief Executive Tsang indicated agreement, saying that the only way to solve the problem in the long run is tackling "market demand and land supply."

A broad array of economic research has documented the higher house prices that occur where there land supply is overly restricted. In a survey of seven nations, Hong Kong was rated as the most unaffordable market in the 7th Annual Demographia Housing Affordability Survey in January, with a Median Multiple of 11.4 (median house price divided by median household income). Sydney and Vancouver, both with stringent land rationing (smart growth) programs ranked second and third, at 9.6 and 9.5 respectively.

Hong Kong Response to High Housing Prices: Expand Land Supply

Wendell Cox — Thu, 24 Feb 2011 11:38:57 -0500

Hong Kong financial chief John Tsang has promised to expand the city's land supply for residential housing, "in response to rising public anger over soaring property prices and repeated warnings of a looming real estate bubble." Channel News Asia's Hong Kong bureau indicated that the move was precipitated by the "sky-high" housing cost that have been drive by insufficient land for development and speculation (which routinely is intensified where demand for housing is permitted to outstrip supply.

Buggle Lau, chief analyst at property firm Midland Holdings told Channel News Asia that he supported the expansion of the land supply "as a way to bring down house prices," adding "It's simple economics - lower demand and higher supply will bring prices down." Channel News Asia noted that Hong Kong had been shown to be the most unaffordable metropolitan market in the recent (7th Annual) Demographia International Housing Affordability Survey.

Unaffordable Housing in Hong Kong

Wendell Cox — Fri, 23 Apr 2010 16:38:24 -0400

For the past six years, Hugh Pavletich of Performance Urban Planning (Christchurch, New Zealand) and I have authored the Demographia International Housing Affordability Survey. The Survey assesses structural housing affordability by the use of the Median Multiple (median house price divided by the median household income). This measure is in wide use and has been recommended by the United Nations and the World Bank.

Six nations are routinely covered, including the United States, the United Kingdom, Canada, Australia, Ireland and New Zealand. In each of these nations, the Median Multiple has been astonishingly similar, at least until recent years, with all six nations having had a Median Multiple of 3.0 or less until the last decade, or at the worst, the late 1980s. Of course, as Demographia and a world-class collection of economists have shown, house prices have risen substantially relative to incomes as a result of growth management (also called smart growth, urban consolidation) that ration land for development.

For the first four years of the Survey, California markets were the most unaffordable, with Los Angeles exceeding 11 at one point, while San Francisco, Honolulu and San Diego exceeded 10. That all changed with the US housing bust, which was the most severe in California. As a result, Vancouver has become the most unaffordable major metropolitan area in the six nations, with a Median Multiple of 9.3 in the 2010 Survey. Sydney was a close second at 9.3.

The South China Morning Post, Hong Kong's leading English language newspaper, approached Demographia to estimate a Median Multiple for Hong Kong. This we were pleased to comply, given our interest in expanding the scope of the Survey to more than the six nations.

It took a considerable amount of "digging" to develop the data, and a number of emails back and forth with The South China Morning Post. The result was an estimated Median Multiple for Hong Kong (the entire Special Economic Region) of 10.4. This makes Hong Kong the least affordable metropolitan area of the 273 Demographia has reported upon. The South China Morning Post illustrated this in an attractive graphic.

At least temporarily, however, home purchasers in Hong Kong have been able to arrange financing packages that mute these high costs. Currently, mortgage interest rates are from 0.8% to 2.1%, which is far below the lowest levels reached in the six nations. As a result, such homeowners find their housing more affordable that some metropolitan areas with higher Median Multiples (such as Vancouver and Sydney).

However, things could soon change. Professor Chau Kwong-wing of the University of Hong Kong calls the present situation: "... just a short-term illusion," adding that "People think they can afford an expensive flat with a reasonably cheap mortgage. Their dreams will burst and the flat will become unaffordable when the interest rate rises." The professor has a point. Variations in interest rates can mask or magnify structural affordability, which is measured by the Median Multiple. This is because interest rates are subject to fluctuation, while buyers and sellers do not renegotiate sales prices after the deal is concluded.

Professor Chau echoed the land regulation views of the economists, indicating that the need for "increasing land supply for sales."

We look forward to routinely reporting on Hong Kong in future editions of the Demographia International Housing Affordability Survey.

Hong Kong has grown fast in recent decades, not only in population but also in income. International Monetary Fund placed Hong Kong's 2009 gross domestic product per capita (adjusted for purchasing power) only 10% below that of the United States, and 15% above its former colonial administrator, the United Kingdom. Hong Kong was even further ahead of other major European Union nations and Japan.