When Hong Kong Chief Executive Carrie Lam officially announced a new “Starter Homes” scheme on Wednesday to help middle-class families own their first home, 27-year-old bank employee Jeffrey Chan was left unmoved.
The combined income of Chan and his fiancee is about HK$7,000 ($897.01) short of what they need to qualify to buy a subsidised apartment under the new scheme. They will have to continue renting for now.
In a research note, Morgan Stanley estimates only about 170,000 households can benefit from the plan which lets in those whose monthly income fall within a narrow band of HK$26,000 to HK$34,000 per person or HK$52,000 to $68,000 per household.
“It’s still very difficult to buy a flat. It made no difference after she spoke,” Chan, a middle office associate at an American investment bank, told Reuters. “Property is ridiculously expensive now.”
Chan hadn’t expected a lucky break, so he wasn’t disappointed when he didn’t get one.
Like most people in Hong Kong, owning his own home is a life goal for Chan, and with a monthly salary of about HK$40,000, he already earns more than 85 percent of Hong Kong’s workforce where the median income is HK$17,000.
But buying a flat is out of Chan’s reach as home prices surged to a historic high in August, with apartments across the territory now costing an average of roughly HK$12,000 per square foot (HK$130,000 per square metre), according to property agency Midland Realty.
A recent UBS report reckoned Hong Kong was the world’s most expensive city for apartments where the average living space is just 150 square feet (14 square metres) per person.
Lam also said the scheme would stipulate in certain land leases that developers would need to build a number of “starter homes” units on top of private units, but gave few other details in her maiden policy address, other than launching the first 1,000 units by the end of next year.
“So far the quantity is not much, so it won’t have an impact on the price of small units, but if it regularly introduces some 2,000 or 3,000 units per year, then it will have an impact,” said Thomas Lam, a senior director at global property consultancy Knight Frank in Hong Kong.
While Hong Kong’s private home prices surged over 160 percent over the last decade, the price hike was especially steep with apartments smaller than 40 square meters (430 square feet) – the kind that Chan would aim to buy – skyrocketing roughly 200 percent over a decade.
A skilled service worker in Hong Kong would need to work 20 years, the longest period of time in a list of 20 cities in the world, before being able to afford a 650 square feet (60 square meters) flat near the city centre, the UBS report said.
The authorities have tried a raft of measures to cool property prices, but Hong Kong’s chief executive Lam conceded that the government had “no magic wands”.
“Ultimately we can’t expect the government to do everything for us and we have to rely on ourselves” Chan said. “If I keep working hard, it should be okay.”