Hong Kong’s Unaffordable Housing Crisis

Hong Kong’s Unaffordable Housing Crisis


One of the basic needs that every human being should be able to enjoy is a shelter. Having a roof above one’s head does not only make them comfortable but also safe from some health threatening factors. Housing needs to be affordable to enable the family to overcome any financial difficulties. What is the importance of affordable housing? If one lives in a house that takes up a significant percentage of their salary, they will find it challenging to meet other basic needs such as food and education (Gurran, 2016). With an affordable house, people enjoy financial freedom, which also impacts the quality of health and security that their families receive. There is a need for an accessible housing system due to the lasting impact that it may have on the homeowners.

Hong Kong has one of the most expensive housing markets in the globe. It has been on top of Demographia’s list for the better part of the last ten years. Demographia International Housing Affordability Survey is an organization focused on comparing the cost of housing versus the average income of residents within a given city. The ratio of the two variables is then used to rank the cities. If, for instance, a city has a value more than ten, it means that the gap between the market price of the houses and the average income is quite huge. As such, the affordability of such housing is quite low; high unaffordability is another way to put it (Tsang et al., 2016).

Why is Hong Kong’s housing costly? There are many reasons that could answer this question. There are two ways to look at it, one of them being the price of the houses and the other being the income of the citizens. At any given time, a product can be unaffordable because some buyers cannot raise the asking price, or the cost of the goods is generally too high for everyone. Such scenarios may be caused by the fact that the supply of housing does not match the demand. This factor is one of the main reasons why the people of Hong Kong are finding it difficult to buy new homes within the city. It is the nature of any business to raise their prices whenever they see an opportunity. The low supply of houses is because there is no much developable space available. Another important explanation is the cost of land in Hong Kong. The government is in charge of all the public , and the developers can only get any plot through tenders, which makes it quite expensive.

How can Hong Kong’s government make the housing market affordable to its citizens? There is a very high probability that the relevant authorities have posted this question to themselves several times. The only way to find the solution is to reevaluate all the causes. This paper will focus on the results of an online study concerning the housing crisis of Hong Kong. Some of them include supply and demand, and the cost of land as the leading causes of unaffordability.A conclusion was made after going through several online materials including the most recent reports published by Demographia.


Literature Review

A person’s success, as well as that of the country, is significantly affected by housing. The affordability of a house will directly impact the spending power of an individual hence restricting them from enjoying quality products and services (Rogers et al., 2017). For example, if the price of private housing in a given city is about ten times the salary of a given individual, this service alone will eat into most of their annual salary. Therefore, as a rule of thumb, one should always buy a house that they can pay for without having to sacrifice other basic needs such as food, education, and health.

Although this rule is quite useful to the financial health of a person, it is sometimes impossible to implement it due to expensive housing in some cities, or countries. Hong Kong is an example of such a region where it is quite challenging to come across a cheap and decent house. Many people living in Hong Kong find it challenging to pay for their homes and still sustain all the other basic needs. According to Demographia, Hong Kong’s score was 18.1 in the 2017 financial year (Kim et al., 2017). It is important to look at how Demographia calculates it to have a better understanding of this result.

Demographia finds the quotient of the price of housing versus the average annual salary within the area. When applied to Hong Kong, the result was found to be 18.1. It means that the price of houses in this area is eighteen times the average salary of an individual living in the region. This value was the highest in the world according to the 2017 survey. A better interpretation would be, a person earning $60,000 per year will use about $1,080,000 on housing. That value is quite high even for those receiving a fortune. As such, if one needs a house, they will need to make several sacrifices to achieve their goals.

The calculations above show that the most critical factor is the ratio of the annual salary to the cost of housing. These are the two variables that are typically used in any survey by Demographia. Therefore, if a government wants to tackle the issue of housing, it will have to consider narrowing the ratio to a smaller value. In other words, the difference between the amount paid for a house and the amount earned by an individual should not be significant. For instance, if on average, people make around $40,000 per year, the cost of houses should be in the range of $200,000 to $300,000. Although this value is still high, the apartments will be a lot more affordable, and the citizens will be able to afford most of the basic needs.

The most reasonable way of reducing the gap between the two variables will be to reduce the cost of housing. It is the only possible way because it is quite difficult to increase everyone’s wages. It is almost impossible because people work in different companies and every organization has its financial policy. Therefore, the government has no moral right to compel any company to change its financial rules unless it is well-stipulated by law. However, the government can reduce the cost of housing by adjusting some factors such as taxes and land rates. Hong Kong is one city that could benefit from these adjustments because the government has full control over the public land.

According to Saiidi (2017) from CNBC, Hong Kong’s tax system is one of the friendliest in the world. Also, a study by the TMF Group of Netherlands ranked Hong Kong among the top ten countries with the lowest taxes (Zhang, 2017). Hong Kong’s government is more dependent on the sale of properties than the deductions in people’s and business profits. Some of these assets include land, and their prices are kept high enough to ensure economic sustainability. If by any chance the cost of these assets is lowered, the amount of money gained by the government will be low and it will not be able to accomplish all its goals.

Another reason that could be given for the unaffordability of the houses is the supply and demand. In any market, the supply and demand of a product are two factors that can either make or break the purchasing power of the buyers. If the supply is high, then the sellers will have to drop their prices because the customers can access the products from other places too. However, if the demand is a lot higher than the supply, the asking prices tend to go high, and the customers will be forced to pay a fortune to enjoy them. Such is the case in Hong Kong, where there is a small number of houses, but the demand is very high. A theory that could explain why the supply is quite low is either the prices of land or the availability of the developable space (Bonnet, 2018). Hills surround Hong Kong, hence there is no much space to erect buildings.


            This section will cover the procedures that I undertook in my research that led to the results that will later be presented in this paper. The research method used in this particular study is the survey method. Since it was a study that had to be done within a short period, I employed the cross-sectional survey method. In this type of research, the data is collected within a single period rather than having a range of time within which the information is gathered. A questionnaire was, therefore, created to cover three main aspects; the cost of housing, the annual income, and what the government should change regarding the housing crisis.

In this research, the main thing that was under study was the ratio of housing prices to the annual wages. As stated earlier, this is the central aspect of the housing affordability. To determine whether a housing market is affordable or not, one has to take into consideration the two factors and how they relate to each other. A more significant gap between the two means that the quotient will be high. It is an indication that there is a high unaffordability of housing within the market under study.

The independent and dependent variables in this particular research are the annual income and the cost of the housing respectively. The former is independent because people work in different companies and the government does not have much control over the wages paid by the organizations. The only time the law can go against the policies of a given company is when they are against human rights. For instance, if the salaries do not match the work done by the employees (lower than the expected value). On the other hand, there are a lot of things that could be changed or adjusted to ensure that the housing market does not become too expensive for people. Therefore, this is a dependent variable because it depends on the government’s policies, the demand, and the number of suppliers within the market.

Since this was online research, the most effective way to identify the pool was via social media. Facebook and Twitter are the most significant social media apps available to us in the modern world. At least 90% of the population aged 18 or more years have access to one of the two social media platforms. Therefore, it would be quite easy to identify the people that qualify for the survey. On Facebook, I searched for groups and pages of people living in Hong Kong. Hong Kong Housing is one of the Facebook pages that passed the test.

However, not everyone who likes a page or joins a Facebook page is always interested in the subject. As such, it was essential to sample some of the members based on what they knew and their interest in the matter. Through private messaging, some of the members communicated to me and fifty people qualified for the survey. Some of the questions asked during the qualification stage included the place of residence, whether or not they have bought a house within the last five years, and if they would be interested in taking part in the study.

After identifying the sample, those who qualified for the process received a link to a customized website. On the landing page of this website, there were five questions, and one was allowed to answer them only once. The five questions were; how much is your annual salary? How much is the cost of your most recent house? How can you describe the tax system of Hong Kong? How easy is it to find a home in Hong Kong? (scale of one to ten)What do you think the government should do increase the affordability of housing in Hong Kong? I used this tool to collect the data because it is the easiest way. With a customized website, a researcher does not have to do the calculations manually because the results are automatically generated. Also, it becomes easier for people to submit their answers because it only requires them to tick the boxes. In other words, it is convenient for both parties.

After everyone had answered the questions presented on the website, the next step was to do the final calculations. The tool added all the values of the annual wages and divided the sum with fifty. The resulting value was the average yearly salary of the people who were sampled for the research. The same process was done for the cost of housing then the result divided by the quotient in the previous calculation. The final answer found from this calculation is the score of Hong Kong’s housing market. The last question was meant to give the researcher an idea of what the people think of the government’s policy with regards to the subject. It is always important to let people give their views to get more insight into the issue.

One of the difficulties experienced in this research is judging how genuine some of the people were. With the current technology, one cannot judge a social media user conclusively based on their profile information alone. An individual could fill their personal information to fit their needs, but it does not necessarily mean that the data is correct. However, since Demographia has done these studies before, I used some of their data just for comparison.


The first question that was presented on the website was on the annual salary. The answers that were given by the fifty people that has been sampled ranged between $70,000 and $137,000. The average value found from the calculations was $83,000 per year. Therefore, based on the results, an average person living in Hong Kong earns anything above or just below $83,000 annually. It is a life-sustaining income since one can afford almost all the basic needs. However, as earlier stated, the big problem in Hong Kong is not the salaries, but the cost of housing. This fact is evident from the answers to the second question.

According to the sample, one will need anywhere between $1,207,000 and $1,606,000 if they are to get a decent house. The average cost of housing based on these answers was found to be $1,370,000. It is quite a high value considering the annual salaries of the individuals who were presenting the information. The final part of the process was finding the score of Hong Kong’s housing market based on the gathered information. To come to the final score, the average housing cost was divided by the annual average wage and the resulting value was 16.51. According to Demographia, the multiple counts of Hong Kong in 2017 was 18.1, that is about 1.6 values more than the calculated value of this research. That is an acceptable margin of error since Demographia’s analysis sampled more people than what was done in this research.

The responses to the third question had a general feeling that the tax system is quite lenient. Everyone pointed to the fact that most of the products and services are not highly taxed. Therefore, it is quite easy for one to access these products without straining their wallet. Some of the respondents also pointed out that the only thing that makes some of the products too expensive is competition and not taxation. However, since the government will still need to raise some revenue to support its development, most of the money is generated from the sale of lands and other assets.

The fourth question focused on the ease of finding a house in Hong Kong. The respondents were expected to choose any number between one and ten to rate the probability of success. The range was further divided into three sections to make it easier for analysis. The first section was one, two and three; the second was four, five, six and seven, then the rest completed the third section. The lower part of the division meant low probability, the second part was average, while the final piece was for high likelihood. Thirty-nine responses fell in the lower segment, 11 in the middle section, while no one chose any number above seven.

The final part of the questionnaire asked about the people’s opinion on how the government could solve the problem. There were several answers, and most of them were related to the cost and expansion of the developable land. Apparently, there is a golf club called The Hong Kong Golf Club that covers a vast amount of land. According to one of the responses, golf is not a Chinese sport, and the government should, therefore, redevelop the area to provide space for building more houses. Another person stated that another solution is to distribute the taxes across other commodities so that the price of land can drop. This option will mean that the costs are shared across all goods and services making it a lot easier for people to deal with the high prices. The government will still gain its revenue but not from one sector


The results of the research, as shown in the findings, shows that the score of the housing market of Hong Kong is 16.51. What this means is that the cost of a house in this city is sixteen times the average annual income of the residents. For instance, if a person earns $50,000 annually, then the market will force him or her to spend sixteen times that salary to purchase a decent house. Therefore, this particular taxpayer will have to put aside about $800,000 for housing alone.

To further put it into context, it will take a person earning the amount mentioned above sixteen years to complete the payment of his or her house. It is important to note that this sixteen-year salary is gross income. In other words, no deductions or extra expenses have been included in the calculations. Therefore, hypothetically speaking, one will have to forego other needs like food, hospital bills, and education if they are going to ultimately settle the housing bills within the said time; that is as expensive as Hong Kong’s housing gets.

It is a problem that has faced the people of Hong Kong for a very long time. In this region, even those who earn vast amounts of salaries feel the pinch. For example, an individual making $200,000 per year will still suffer the same predicament. The gap between this salary and the cost of housing is still too big. Therefore, it will require one to make several sacrifices to enable them to live in a good house. Sacrificing other basic needs to accomplish one goal is what can sometimes hinder one’s success. If a taxpayer decides to buy a house and he earns $150,000 per year, he will be expected to make the payments for over ten years. During this period, the kids have to go to school, and the family needs food and healthcare. As such, one’s bank account strained and no much developments can be done.

The same impact the economy of the country because the purchasing power of the taxpayers is limited. A country’s economy is always reliant on the rate at which money flows between people and businesses. The same is also dependent on the purchasing power of the consumers. However, if one is limited to paying for two or three products and services per year, there will a huge impact on the economy. Therefore, if the housing crisis continues, Hong Kong may start facing some economic issues in the near future.

The question on taxation yielded a lot of responses, but all of them pointed to the fact that it is a friendly system. Both the people and the government are the beneficiaries of such a system. The people benefit in the sense that they have a chance to make a lot of profits from their businesses. In other countries, one will have to pay for other documentation apart from the licenses. The government generates some of its revenues from the distribution of these additional registrations. However, in Hong Kong, some of them are not applicable, meaning that a business will make more money. Also, most of the products are either not taxed or have meager taxation rates. As such, the consumers can purchase them at low prices and the sellers will still make a good income. Even though the government will not be able to get its revenue from taxes, it will be able to do so from the sale of properties. Therefore, land and other related resources tend to be very expensive.

The effect of the expensive lands is not only felt by the developers but also the consumers. If a developer buys a plot of land for $2 billion, they will need to sell the house at insane prices to make any reasonable profits. Otherwise, the developers will always be at a loss whenever they get into such a business. As such, those who would like to have private homes will have to set aside a lot of money to have a chance of living their dreams. The government should, therefore, consider this as one of the leads to the solution for the crisis that is becoming disastrous by day.

According to those who answered the questionnaire, it is quite difficult to find a house in Hong Kong. The findings showed that 39 of the ratings fell in the lowest section while no one selected any number on the opposite end of the range. These responses are a representation of what the people of Hong Kong think. It can be interpreted to mean that for every fifty people, about forty of them find it difficult to come across a house being sold. Therefore, it can be concluded that it is the probability of successfully buyinghouse in Hong Kong at this point and time is very low because of unavailability.

The result of the fourth question is more proof of the theory of supply and demand. As stated earlier in the paper, some of the studies done before have shown that there is a meager supply of housing facilities in Hong Kong. The city is one of the most populated cities in the world, creating even a more significant gap between supply and demand. It is a factor that affects every business environment at some point. This scenario appears when there are many consumers, but the suppliers of certain products and services are not enough to satisfy the needs. In Hong Kong, there are two possible explanations for the low housing supply.

One of the explanation is the fact that the government has all the control over public land. As such, the developers can only access the developable land through tenders. Small plots of land are sold at very high prices, and only those who can afford them will carry the day. The effect of this is that the number of suppliers drops because not all of them can afford to produce $2 billion for a small piece of land. Another explanation, and the most significant is the availability of space to construct new buildings. Hong Kong is a hilly place, meaning that it is almost impossible to expand any further than the current location. Therefore, developers scramble for the remaining spaces, which are too small. Since the developers want to make more money out the business, they tend to construct tiny apartments to accommodate more people. However, regardless of the sizes, it is still challenging to satisfy the demand levels.

The problems highlighted in the four questions led to the final question which focused on the possible solutions. As expected, land expansion was the most common answer. Hong Kong government has to take steps to ensure that more space is created for the development of more housing facilities. Some of the answers to this question pointed fingers to the Hong Kong Golf Club. It is an area set aside for golfers and was built more than a century ago. It also has a huge parking lot. Some people believe that golf is not a Chinese thing and, therefore, should not be prioritized over the basic needs of people. It is a fair argument because golf is not in the culture of the Chinese, and at the same time people need a place to stay. It might be an essential facility to a part of the community, but given the current situation, housing should be prioritized.

Any move that creates more developable land is a solution to this problem. However, it is very hard to achieve this while ensuring that Hong Kong’s green environment is kept safe. For instance, a decision could be made to create space in the peripheral areas of Hong Kong’s parks. Although it will be a great move, the same could escalate to a whole new problem. It is similar to forest destruction, once a part of it has been cut down, it will become a habit, and within no time, the whole forest will be down.




Hong Kong’s housing is entirely unaffordable because of two main reasons, one of them being the land prices. The government does not depend more on taxation as a way revenue generation. Instead, it puts more emphasis on the cost of some of its properties, land being among them. Therefore, the price of land is set at a value that can only be afforded by a few people. Those who are lucky to buy these pieces of land construct houses and sell them at an amount that will lead to profits.

Since there are only a few suppliers, the issue of supply and demand comes in (and is made even worse by the density of the population in Hong Kong). Low supply is also caused by the fact that the spaces for erecting new buildings are becoming extinct due to geographical issues. To find more accurate answers in the future, the sample size should be increased. Increasing the number of people ensures that a more significant percentage of the population is represented. Also, people should not be from the same area of the city. It was not possible to do so in this research because the sample was randomly chosen from a social media platform.



Bonnet, O. (2018). Individual housing choices and aggregate housing prices (Doctoral dissertation, Sciences Po).

Gurran, N., Gallent, N., & Chiu, R. L. (2016). Politics, planning and housing supply in Australia, England, and Hong Kong. Routledge.

Kim, H. G., Hung, K. C., & Park, S. Y. (2015). Determinants of housing prices in Hong Kong: a Box-Cox quantile regression approach. The Journal of Real Estate Finance and Economics50(2), 270-287.

La Grange, A., & Pretorius, F. (2016). State-led gentrification in Hong Kong. Urban Studies53(3), 506-523.

Litman, T. (2018). True Affordability: Critiquing the International Housing Affordability Survey.

Rogers, D., Nelson, J., & Wong, A. (2018). Geographies of hyper‐commodified housing: foreign capital, market activity, and housing stress. Geographical Research.

Rogers, D., Wong, A., & Nelson, J. (2017). Public perceptions of foreign and Chinese real estate investment: intercultural relations in Global Sydney. Australian Geographer48(4), 437-455.

Rose, J. (2017). The Housing Supply Myth.

Saiidi, U. (2017) Here’s Why Hong Kong Housing is so Expensive. Cnbc.com. retrieved from www.cnbc.com/2017/04/09/heres-why-hong-kong-housing-is-so-expensive.html

Squires, G., & White, I. (2019). Resilience and housing markets: Who is it really for?. Land Use Policy81, 167-174.

Tsang, C. K., Wong, W. K., & Horowitz, I. (2016). Arbitrage opportunities, efficiency, and the role of risk preferences in the Hong Kong property market. Studies in Economics and Finance33(4), 735-754.

Zhang, R. J. (2017). A Tale of Two Cities: Comparative Study of Public Housing Policies of Hong Kong and Singapore.

Do you need high quality Custom Essay Writing Services?

Custom Essay writing Service