The corporatist government of Hong Kong
Written by Timothy Schoonover on 17 June 2020 in San Ramon, California. Inspired by the video, "The Unstoppable Economy Of Hong Kong: The Land Of Billionaires" by Economics Explained.
Hong Kong, known officially as the Hong Kong Special Administrative Region of the People's Republic of China (HKSARPRC?), is the confluence between the West and the East.
Under British control for over a century, its European influences are everywhere. Yet the Chinese are trying to bring the naughty region closer under its wing.
One of the things that have resulted from this is a new system of taxation in Hong Kong. All land in Hong Kong is owned by the Special Administrative Region, which means that taxation in Hong Kong is essentially in the form of rents.
A standard feature of communist nations like the People's Republic of China, government ownership of all land in a nation is not special by a long shot to Hong Kong. The result of this policy is very special to Hong Kong, however.
According to the website Numbeo, apartments in Hong Kong can range from 12,338.46 HKD per month for a 1 bedroom apartment outside the city centre all the way to 38,486.30 HKD per month for a 3 bedroom apartment inside the city centre. As of the original publication date of this article, that equates to 1,592.03 to 4,965.88 USD per month or 2,303.029-7,183.64 AUD per month.
These prices would be normal in a large American city like San Francisco or New York City, but considering that the GDP per capita of Hong Kong (approximately the average income of Hong Kongers) was just around 48,675 USD in 2018 according to the World Bank compared to the jobs in SF and NYC that pay upwards of $100,000 USD per year.
One of the contributing reasons to these abnormally high real estate prices (at least compared to income) in Hong Kong is due to the fact that the Hong Kong government has an incentive to keep prices as high as possible because real estate represents the majority of the government's revenue.
Despite having the world's most skyscrapers of any city in the world, despite being able to take back some land from the sea for new apartments, despite being able to use some parklands for new apartments (which would not go without controversy in its own right), Hong Kong still has unsustainable real estate prices due to government manipulation.
The Hong Kong real estate crisis has made it clear that the Hong Kong government is willing to cater to real estate development companies (some of which the government actually actually has a shareholding in) in order to keep prices higher.
The government has made it clear to developers that real estate is one of the industries in Hong Kong that the government is willing to protect and bailout (think the Hong Konger version of "too big to fail").
This cartel between the government and the developers has only one victim—the people of Hong Kong, who are forced to cramp into ever smaller apartments, even cages, just as a means to live in their city.