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Hong Kong's surging real estate prices shed light on rising inequality

In the world's most expensive place to own a home, almost half of the population lives in public housing.

 

Editor's Note: This story is part of a GlobalPost Special Report on income inequality around the world, "The Great Divide."

HONG KONG — There are few places for ordinary people to escape the mobs of tourists, touts and handbag hawkers in Tsim Sha Tsui — Hong Kong’s commercial hub — but for members of the city’s upper crust, there’s always the Platinum Lounge.

Tucked away in the perfume section of luxury retailer Lane Crawford, the Platinum Lounge is available to cardholders who spend more than $10,000 a year at the department store. Inside this opulent oasis, uniformed attendants bring free drinks and mushroom quiche on silver trays. An original Andy Warhol screen print hangs from the wall.

I am here on the invitation of Don, 30, for whom the platinum membership is an afterthought. A member of the city’s elite, Don said that in a typical month, he spends around $13,000 on his credit cards, though in December the total came to $65,000. The free miles he earns on these sums have taken him to Japan, Thailand, Singapore, Morocco, Germany, and Malaysia in the last year alone.

We are here to discuss inequality in Hong Kong, which has one of the steepest wealth gaps in Asia. Since 2001, the city’s Gini coefficient — a measure of inequality from 0 to 1, in which a score of one indicates a country where all the income goes to one person — has risen from 0.525 to 0.537, higher than New York City or Washington, DC.

“I’m not that moved by the unequal distribution of wealth,” says Don, a pseudonym used at his request. “It’s never going to be perfect. Communism has taught us that doesn’t work.”

Don freely admits that he and his cohort of young, wealthy Hong Kongers have become the objects of local resentment. That marks a change from the 1980s and 1990s, he says, when wealthy people and tycoons such as Li Ka Shing were widely admired.

“The middle and working classes no longer feel like they have the opportunity to become rich,” Don says. “You hear a lot more snide comments.”

More so than perhaps anywhere else, conspicuous consumption remains part of the lifeblood of Hong Kong. This city of 7 million owns more Rolls Royces and drinks more cognac per capita than any place on Earth. It has the world’s most expensive retail real estate and the highest concentration of luxury stores. And Hong Kong is consistently ranked as having the “freest” economy in the world, thanks to its low income taxes and untaxed capital gains.

But as with other places around the world, inequality has become so great that social tensions are increasing. Public anger over unaffordable housing and inequality erupted repeatedly in 2012. In July, up to 400,000 people took to the streets following the inauguration of new Chief Executive CY Leung. Between 2001 and 2010, incomes for Hong Kong’s top 10 percent grew by 60 percent, while the bottom 10 percent saw their incomes drop by a fifth.

“Over the last 15 years, things have gotten worse for poor people in Hong Kong,” said Lee Tai Shing, chief community organizer for an alliance of CSSA, an alliance of anti-poverty organizations.

The growing gap is attributable to several inexorable trends. Over the last two decades the city’s economy has hollowed out, as manufacturers seeking cheaper labor moved factories across the border into China. In addition, Hong Kong’s population is aging fast. In 2011, the median age of Hong Kong was 41, and more than 28 percent of households included an elderly person over age 65. Every public park is filled with elderly retirees playing Chinese chess, or taking advantage of free seating. Finally, expansion in the city’s high-flying financial sector has concentrated income gains in the hands of a few high-skilled workers.

“After the financial crisis, our economy became more rigid. More than 90 percent of our economy is now services, where income grows slower. Now we don’t see upward mobility,” says Li Kui-wai, professor of economics at the City University of Hong Kong.

But perhaps the single biggest factor in rising inequality is real estate. By just about any measure, Hong Kong is the world’s most expensive place to own a home. Since 2009, housing prices have surged 85 percent, exceeding their peak before the real-estate bubble burst in 1997. To buy a one-bedroom, 852-square-foot apartment at The Belcher’s, a building on the west side of Hong Kong island, costs over $1.5 million. (For reference, that’s a little smaller than a badminton court.) At the upper end, houses on Victoria Peak — the tallest mountain on Hong Kong island — start selling at $20 million or more. In November, a Frank Gehry-designed apartment on the peak sold for an astounding $60 million.

Even for ordinary homes, housing prices have been on a relentless tear. The median home price in Hong Kong is now nearly 13 times the annual median household income, according to the research group Demographia. In the US that figure is three.

Such statistics help explain the plight of people like Woo Shin, 62. Woo — a spry man sporting sandals on a January afternoon — lives with his wife in a “cubicle” in Kowloon that was created by splitting a single apartment into four units. Their entire living quarters measures 60 square feet. (That’s a bit bigger than a ping-pong table.) The apartment’s single door can open barely halfway. Almost all of the apartment is taken up by the bed, which lies heaped with laundry and spare bags. The stove, which is at the foot of the bed, stands beside the toilet. Rent is $280 a month.

“Living in that place is very hard,” Woo said. “I like doing calligraphy, but I can’t even open a piece of paper. When I have a guest, there’s nowhere to sit. … I sometimes feel like I’m a wandering ghost. It’s not a home.”

Woo’s wife works as a security guard, making Hong Kong’s minimum wage of $3.87 an hour. They have applied for public housing — small, heavily subsidized apartments — and have been on the wait list for nearly three years. Almost half of Hong Kong’s population now lives in these public housing estates: massive, 40-story high-rises that lie on the far edges of the city. Residents are typically granted about 140 square feet per person, and the average rent ranges from $33 a month to $450. The wait list as of March of last year was more than 189,000 people long.

The government of Chief Executive CY Leung, who took office last summer, has given some poor people hope by promising to tamp down on the real-estate frenzy, and expand the availability of public housing. In late 2012, he rolled out a measure intended to discourage foreign — and, more particularly, mainland Chinese — buyers of Hong Kong property by imposing a 15 percent tax on property purchased by non-residents. Yet many doubt that Leung will allow prices to fall significantly.

“If he wants to make fair policies, he will have to conflict with business people,” says Lee, the community organizer. “I don’t think he has the guts to do it.”

“It’s not going to work because the whole system is so speculative,” says Li, the economist. “The political will is not there. … All the leaders in Hong Kong here, they all have multiple homes. So do you expect them to reduce their wealth? Nobody likes to see a drop in property price. It’s a very selfish attitude, but that’s how it is.”

Among the wealthy in Hong Kong, there’s even a feeling that the government is perhaps already giving too much. At the Platinum Lounge, Don remarked that while Hong Kong people take to the streets to air their discontents quite frequently, they actually enjoy a higher quality of life than most of the world--including America.

“I think the lower and working class don’t have it so bad, because there’s housing, health care, education. The access is still there, which is more than can be said for more than most places," he said.

“Here, you live in a room as big as two of these carpets,” he said, gesturing at the silver rug beneath our feet, “and your toilet’s the size of that stool. But it’s effectively free. And your kids can go to school. If you get cancer tomorrow, your health care is taken care of... Maybe people should be given more opportunities, but I don’t think society is necessarily unfair. Obviously there aren’t enough resources to go around so that everyone can live the way I live.”

More from GlobalPost: The Great Divide: Global income inequality and its cost

http://www.globalpost.com/dispatches/globalpost-blogs/groundtruth/hong-kong-surging-real-estate-prices-great-divide-inequality