We feel very privileged to live on Lamma Island, that is home to a relatively quiet rural community, just 25 minutes ferry ride away from the high rises, high life, high fashion and high prices on Hong Kong Island, adjoining Kowloon and the other mainland areas of the Special Administrative Region, as it is called ever since the transfer of sovereignty (referred to as “the Handover” by the English language international press, and “the Return” in mainland China) in 1997.
Our coming here adds to an ongoing problem for the local population, as new immigrants drive up land and housing prices; the age-old conundrum in every country that seeks added income through increased tourism or external investment. In this regard, Austria comes to mind as an exceptional country, where tourism is a large contributor to the economy that manages to raise the standard of living of the local population without pricing them out of the housing market. Opinions on this from some of my economist friends welcomed here!
Reblogged this on aviott.
Aviott, With all due respect for your views, I think that tourism – at least the normal variety – has little to do with gyrations of the property market. Looking at the data (I confess that I had not done so before!), the experience of Vienna has actually been rather similar to that of Hong Kong in the years since 1999/2000. If you look at the two charts – which I posted here: http://larrywillmore.net/Vienna_Hong_Kong.pdf – you will see that the Vienna index has grown steadily, and in 2012 reached 170, from a 2000 base of 100. The Hong Kong index is now at 200, compared to a 1999 base of 100 (and a previous high of about 170 in 1997).
In both cities, free market rents have increased much less than housing prices. Also, in both cities approximately half the population lives in subsidized public housing.
The housing boom (bubble?), I contend, is driven not so much by migration – even less by tourism – but rather by speculation. Prices go up today because purchasers believe that the prices will be even higher tomorrow. Stock prices go up, often exuberantly, for the same reason. But stocks and bonds, unlike housing, do not require a coat of paint, nor a search for appropriate tenants, so are less of a headache (so long as the market does not plunge).
In both cities, the indexes ignore the wide variations in prices by district. In Vienna, prices in the first district are two to three times higher than in ‘good’ areas of other districts. Why? Because of the shortage of apartments, especially larger apartments (>100 square meters), and this is a product of zoning restrictions. Old buildings in the city centre cannot be demolished and replaced with high rises. In Hong Kong, the sky is the limit for high rises – but even there, there is congestion on the main island, so prices for flats are much higher.
Given the price/rental ratios in both Hong Kong and Vienna, I would recommend a rental rather than a purchase.of property. But, if you want to gamble on the purchase of something, that is your choice.
Whether you are renting or buying, however, do not feel guilty. Prices will go up (or down) with or without an influx of newcomers. The market is driven largely by psychology, by ‘animal spirits’, not by fundamentals.
Now, high-end tourism – the kind that purchases luxury apartments around the world – kind certainly drive up the prices of very scarce, centrally-located luxury housing. That is happening in Vienna, Hong Kong, London, Vancouver and similar cities. But that has little or no effect on the cost of living of those less privileged.
Thanks for your clarifying remarks, Larry, and for pointing out the similarities between Vienna and Hong Kong. I would never have guessed it from my observations of real estate prices in Vienna, although the increase has been very noticeable in the last two years.
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