Table of Contents
Chapter 1: The inherent dilemma of geography and history
1.1 Natural limitations due to the large number of mountains and limited land
Hong Kong has a land area of only 1,106 square kilometres, but less than 25% of flat land is developable, and more than 40% of land is country park protection. The "high land price policy" formed during the colonial period has left a far-reaching legacy. The first land auction in 1841 established the government's monopoly on land supply. This "artificial scarcity" mechanism makes land a pillar of government finances (land sales revenue still accounted for 11.3% of total fiscal revenue in 2022).
1.2 The century-old problem of urban planning
The two sides of Victoria Harbour have been fully developed, and the development of land in the New Territories involves the complex Dingquan system and ancestral land issues. According to the Development Bureau, about 2,400 hectares of farmland in Hong Kong are held by the four major developers, but are difficult to release due to a deadlock in the land premium mechanism. Taking the Kwu Tung North New Development Area as an example, it took more than 15 years from planning to the first batch of residents moving in.
Chapter 2: The distorted cycle of economic mechanisms
2.1 The double-edged sword effect of financial centers
The world's lowest property stamp duty (0.01%) attracts international hot money. In 2023, foreign capital accounted for 38% of residential transaction volume. The linked exchange rate system has caused Hong Kong's interest rates to follow those of the United States for a long time, but the property market is deeply tied to capital flows from the mainland. Cheap capital in the QE era gave rise to the phenomenon of "building securitization". In 2022, the average residential price per square foot reached HK$14,230, an increase of HK$891,130 from the high in 1997.
2.2 Fatal tilt in industrial structure
Real estate and related industries account for 23% of GDP, forming an ecological chain of "real estate hegemony". The four major developers have pushed up the marginal profit margin of residential development to more than 40% through methods such as "water-flooded buildings" and "nano units". What is more serious is that the subdivided flat market has become a gray industry with an annual scale of over HK$20 billion.
Chapter 3: Structural contradictions in the policy system
3.1 The paradoxical effect of public housing
The waiting time for public housing has hit a 23-year high of 6.1 years, but this has in turn supported the private property market - about 43% families have temporarily postponed buying a home because they are "waiting for a house." The Home Ownership Scheme (HOS) policy has become a price distorter. Although the pricing mechanism for new HOS in 2023 will be decoupled from the market price, the average price after discount is still 8.7 times the median annual household income.
3.2 Marginal failure of tax regulation
Twelve years after the implementation of "tough measures" such as additional stamp duty (SSD) and buyer's stamp duty (BSD), the proportion of investors has only dropped from 35% to 28%. Instead, it gave rise to circumvention measures such as "one contract for multiple partners", and caused the turnover rate of the second-hand market to drop to a historical low of 0.8%. Although the residential vacancy tax will be restarted in 2023, the vacancy rate of 4.5% is still higher than the healthy level.
Chapter 4: Deep-seated socio-cultural problems
4.1 Collective obsession with property ownership
Hong Kong people have a deep-rooted value system that equates owning a house with success in life. Polls show that 761,030 young people believe that "one cannot have a family without a house". This culture has given rise to a deformed market of "nano buildings". In 2023, the average usable area of new homes will be only 452 square feet, a decrease of 31% compared with 20 years ago. The phenomenon of "father buying a house" (parents funding the down payment) has even emerged, but the average age of first-time home buyers has still been delayed to 44 years old.
4.2 The vicious cycle of intergenerational conflict
The "housing disaster generation" born after 1997 faces a triple blow: universal higher education (median student debt is $210,000), industry homogenization (finance and real estate account for 58% of the job market), and asset price inflation. The result is that the rent-to-income ratio of young residents is as high as 62%, 27 percentage points higher than that of the same age group in Singapore.
Chapter 5: Special Dilemma in Global Comparison
5.1 International comparison of extreme data
– House price to income ratio: Hong Kong 19.8 times (New York 10.2, London 8.7)
– Rental return rate: 2.1% (the lowest among major cities in the world)
– Average living space per capita: 161 square feet (Tokyo: 631 TP3T, Singapore: 521 TP3T)
5.2 Differences in land development governance
Singapore maintains its home ownership rate at 89% through land reclamation (land area expansion of 25%) and public housing policies. In contrast, in Hong Kong, only 7,000 hectares of land have been reclaimed in the past 20 years, and the "Lantau Tomorrow" project has been controversial. More importantly, Hong Kong lacks a provident fund system similar to CPF to support residents’ ability to purchase homes.
Chapter 6: Real challenges on the road to breaking the impasse
6.1 Technical barriers to land supply
The development of the northern metropolitan area requires the disposal of 1,200 hectares of brownfield sites, the relocation of 150,000 graves, and compensation to thousands of New Territories indigenous people. Even if the process is accelerated, only 130,000 units can be provided before 2032, which is less than the required 60%. Although transitional measures such as the “assembly and assembly method” have increased construction speed, the cost is still 18% higher than traditional methods.
6.2 Institutional Reform of Interest Structure
The amendment to the Land Resumption Ordinance has raised the risk of judicial review, and the first phase of land resumption in 2025 may face hundreds of lawsuits. The Real Estate Developers Association holds 70% of undeveloped land reserves in Hong Kong, but tends to launch projects in a "toothpaste-squeezing" manner to maintain high premiums. The construction cost of public housing is HK$5,200 per square foot, which is HK$331,330 higher than that of private developers, reflecting institutional inefficiency.
Conclusion: The cost of breaking out of a systemic crisis
The essence of Hong Kong’s housing problem is the “trilemma”: it is impossible to achieve stable housing prices, market freedom, and social equity at the same time. To break the impasse, one may need to endure short-term economic pain (decline in real estate-related industries), challenge vested interests (reform the land system), or subvert cultural cognition (promote a rental society). Under the dual pressures of an aging population and competition in the Greater Bay Area, the window for breaking out of this century-long housing war is shrinking, but it is also testing the city's wisdom in transformation.
Further reading:
- Hong Kong’s high housing price dilemma: a systemic crisis that threatens the future
- Why Hong Kong has difficulty nurturing world-class companies
- The phenomenon of "buying a house to get married" in Hong Kong society: multiple interpretations of culture, economy and gender roles
- An in-depth analysis of "Is the difficulty for Hong Kong people to buy houses a legacy of the land policy of the British Hong Kong government before 1997?"
