Watching urban development in HK for the last few years, my eyes have been sharpened for two major issues that mainland China currently also faces and which are intrinsically linked to urbanization: the real estate market and environmental protection.
Welfare Housing for HK Residents Only
As Mr. Fung, our business partner drives his SUV from North Point to Repulse Bay to our meeting location we have time for some small talk. And there is much to tell. We pass a 30 story development, that looks much like a jail or typical mainland student dorm, small balconies crammed with laundry waiting to dry, tiny windows that let small rays of sun into the surely not too large rooms. I am told that the building is a public housing development owned by the HK government. The department of housing lets these apartments as part of the city’s welfare scheme to low income tenants. If the family income does not exceed HKD 20k a home is available for approx. HKD1200. Right next door is a private compound, that looks more like a glass-façade, downtown skyscraper than a close to peak summit dwelling. I am told that apartments in this building are currently sold for HKD 25k a square foot.
Let us hold here to contemplate these numbers. HK houses are sold in good old British style per square foot, not per square meter, i.e. the square foot price has to be multiplied by nine to come to the square meter price. If I would be entitled to rent a 900 square foot social housing apartment, I would have to pay HKD 1200 rent. If I would like to purchase a 900 square foot apartment next door, I would need liquidity of HKD 22.5 million, i.e. about EUR 2.2 million for 100m2 construction area. 100m2 construction area then again would be only about 80m2 usable living area, i.e. one square meter would actually cost me 281250 HKD that is roughly EUR 28k. And we are not talking about a prime location, because those are sold for EUR 100k/m2 and even more.
HK average income on the other hand has not changed on a nominal basis during the last decade. A HK male grossed about HKD 12k in 2001; in 2011 it was HKD 13k despite property prices going through the roof and food prices growing steadily. As a result Hongkonger’s living standards have not improved. Quite on the contrary the wealth gap it widening, indicated by a Gini coefficient of 0.537 in 2011.
Welfare Housing Schemes for a Harmonious Chinese Society
Considering that housing prices have gone up in mainland during the last 10 years manifold, the question always arises, where these prices might eventually come to a halt. Is there a real estate bubble or not? A lot of people say there is. I say there is not such a thing. Hongkong is a trendsetter for mainland China; prices that are now being paid here will be paid in Shanghai 20 years from now. The reason for this assumption is population density in urban areas, which are naturally limited in space. China is as of 2012 holding at an urbanization rate of roughly 51%, but will eventually reach a rate like the EU or the US of 80% and more. It could be said that HK has an urbanization rate of 100% since it is a city-state, but this is only one perspective. Looking at HK as part of the Southern China or the Pearl River Delta, it is more like one of many urban centers. There are predictions that HK will merge into one mega-metropolis of 120 million inhabitants with its neighbor cities Shenzhen, Zhuhai, Dongguan, Foshan, Huizhou, Guangzhou, etc.
All cities have limited space, no matter where they are located. People want to live close to the center, and even if structured as small villages or boroughs within a metropolis like e.g. in most Anglo-Saxon agglomerations like London or New York, these relatively centrally located areas will be limited in space; even more so, if one thinks of cities of centralized nations that have only one center like Paris or Beijing. An increase in population increases the demand in living space; as does the value of this space. Hongkong is the foremost SEA example of condensed living with an average population density of approx. 6000 persons/m2, but Beijing and Shanghai, the main urban agglomerations of mainland China have been on a similar track during the last years with an unstoppable influx of former country dwellers. The Chinese government is therefore well advised to start soon with a balanced public housing program unless it wants similar unrest as Hongkong is facing during recent years. Private apartment owners in HK don’t want public housing projects in their prime neighborhoods. Social housing tenants don’t agree to be dislocated to far off suburban areas.
Egypt, Hongkong and Chinese Locusts
Why do devout Christian Hongkongers feel sympathy with the Egyptians of the Old Testament? Because both people have been befallen by a swarm of locusts. A more recent flood of protests was prompted in HK residents because an increasing number of mainland Chinese citizens tries to get into the city-state, to shop, to consume, to live, to study, to be naturalized. HK citizenship being awarded upon birth, makes mainland mothers crossing the borders literally when being in labors. Mainlanders accounted for nearly half of HK’s 88,000 births in 2010, prompting an outcry over shortages of places in maternity wards and the soaring cost of childbirth in the former British colony of seven million people. In regard to public housing projects a similar sentiment of HK residents erupted into protests and resulted in restricting public housing to HK residents only. Counting 200 Million mainland Chinese border crossings to HK in 2012 it is understandable that native HK inhabitants feel threatened in every aspect of their life and that the HK government is forced to act.
One of the government measures had immediate impact on our border crossing from Shenzhen into Hongkong on January 7, 2013, because it had come into force exactly on that day. Its objective is to prevent Chinese citizens to cross the border individually, but equipped with only a group visa. Most Chinese are not entitled to apply for an individual border-crossing permit, which is restricted to Shenzhen residents and holders of first tiers city household registries. In practice, holders of a group border-crossing permit arrive individually at the checkpoint and pay around CNY 200 to be taken across the border by a local travel agency. That practice is formally against the law, but Chinese authorities turn a blind eye to it. In fact, we did ask the border officers at the supervision counter where we would get due to the late hour of our arrival at the check point such a border-crossing permit without being part of a tour group; and we were friendly pointed to a small office at the opposite end of the check point hall. The travel agent there asked a multiple of the standard fee, CNY 800, first, then told us that no more “tours” could be arranged that evening. Back at the border officer’s supervision counter we were told that there is another checkpoint (including available travel agents) that is operating 24/7. After we had been taken across the Shenzhen-Hongkong border, which felt a bit like an illegal Mexico-US border crossing that one knows from movies, I realized that the new measure won’t have any impact. Mainlanders will continue to visit HK in high numbers. Its one country, after all; so why having a border, anyway?
Hongkong: China’s Urban Environment Protection Pilot Project
As Beijingers are choking on hazardous smog with unprecedented PM levels, Hongkongers are living in a rather clean environment. If I would have to compare two European cities with Beijing and Hongkong, Naples and Hamburg come to my mind. The local pollution index Hedley shows nevertheless that environmental degradation in HK is far beyond recommended WHO level and needs to be improved. On our way back to my hotel we pass HK harbor and I am told that there is a huge environmental project being implemented during the last two decades: the revitalization of the HK harbor. During the 70ies there was still an annual sporting spectacle, the Victoria Harbor Swim in which HK residents swam across the bay from Kowloon to Central Island. But as the population increased, so increased the pollution of the bay waters and eventually swimming in local waters stopped, as did the Victoria Harbor Swim in 1978. In 2012 this traditional event was hosted again after a break of 34 years, because the water quality has improved. Billions of HK$ have been invested in this massive revitalization project. “I don’t think the HK government is that powerful” tells us our business partner Mr. Fung “they must have had approval by Beijing.” He continues to think aloud, “I am pretty sure that HK is something like a pilot project for all big mainland cities in regard to environmental protection. Lessons learned here, can be applied on a much bigger scale in all those polluted cities up North.” Its very likely that the central government plans its actions like that. What would have happened if it had denied such a clean up program? Wouldn’t have Hongkongers gone up the walls? As the living standard rises, citizens focus on other values. Not anymore mere economic survival, but health and with health longer survival if broken down to its core, becomes the key concern. Would HK still be polluted like it was in the early 90ies, most who can afford would have left. Most Hongkongers at least have the freedom to leave.
How free is man in HK?
A global freedom index puts HK every year on a medal rank; 2012 it was third after New Zealand and the Netherlands; the US Republican propaganda organization heritage.org even puts it the 19th consecutive year in first place. But what kind of freedom do HK citizens really enjoy? Being squeezed into a small city of roughly 1000 m2, most of which – in particular the New Territories and some outlying islands - is not inhabited, and most residents unable to finance even a small home, I perceive HK as a freedom restricted place to live. Some Hongkongers seem to feel similar, because they choose outlying farm steads over downtown city dwellings and rather grow rice than waste their life in high-rise. If freedom is only about consumer choices and low (visible) taxes, the concept of freedom has been perverted. Man being able to choose where to live, having the power to acquire shelter with guaranteed property rights, is a central part of my concept of freedom. HK does not live up to this standard. If at all, then this freedom is only for the superrich at the expense of their human fellow beings.
 http://www.scmp.com/news/hong-kong/article/1125080/hong-kong-risks-losing-its-worlds-freest-economy-title-says-report (read the readers’ comments)