The Hong Kong Property Market: Does growing inequality warrant a change in its structure?
By: Helena Wing Sum Wong
Abstract: Economic inequality is growing in Hong Kong. One reason may be the structure of the Hong Kong property market, which perpetuates poverty and increases wealth of the economic elite. A Rawlsian distributive justice analysis suggests that the Hong Kong government should change the structure of the property market if such change leads to improving the situation of the least advantaged members of society. The author recommends the government gradually increase the supply of land rather than implement the “resumption of land” policy.
The structure of the property market in Hong Kong is, at least, partly responsible for the growing inequality in Hong Kong society.
According to the Census and Statistics Department of the Hong Kong Government[1], the Gini coefficient rose from 0.525 in 2001 to 0.537 in 2011, suggesting an increase in inequality.
A point to note is that, while the Gini coefficient is often seen as the best measure of income inequality, it may not be fully representative.[2] The Gini coefficient has limitations when comparing income inequalities across countries and over time.[3] First of all, there may be differences in data sources, income definitions and compilation methods in different countries, making it difficult to compare between countries.[4] Second, even if we assume the above difficulty does not exist, a temporal trend in increasing inequality may reflect a change in family structure, e.g. household size. In the Hong Kong context, the temporal change in the Gini coefficient might be due to the change in the age structure of the Hong Kong population. The proportion of persons aged 65 and over increased from 3.3% in 1966 to 12.4% in 2006, and is projected to further increase to 26.4% in 2026.[5] While an ageing trend is likely to increase the Gini coefficient, it does not necessarily entail growing inequality. Furthermore the Gini coefficient only measures inequality in terms of income. It does not take into account of inequality in terms of wealth or power.
With these limitations in mind, the data are clear about the growing inequality, in terms of wealth, income and power, in Hong Kong society. It is not so much that the poorest are becoming even worse off but that the rich have become even richer as a result of the property market, causing the poorest to become relatively worse off. During the year to end-November 2012 house prices skyrocketed by 19.22% (inflation-adjusted), the highest year-on-year increase since June 2011.[6] This means that property owners have become better off as their wealth increases. On the other hand, those who do not yet own any property lose out from this increase in wealth. This group is less likely to own property as property prices get more unaffordable. Rising rental rates[7] also means that those who do not own property have to spend more of their income to pay for the rental of property. At the same time, those who own more than one property are able to rent out their properties and receive higher income as a result. This, in turn, further increases the wealth of those property owners and thus increases both the income and wealth gap between non-property owners and those who are able to let out their properties…
* Helena Wing Sum Wong studies law at the University of Hong Kong. Her research includes work in finance and ethics.
[1] Hong Kong Census and Statistics Department: 2011 Population Census Thematic Report: Household Income Distribution in Hong Kong, Table 8.1, p 137, available at http://www.statistics.gov.hk/pub/B11200572012XXXXB0100.pdf [Accessed on 15 July 2013]
[2] Wu, Xiaogang. “Income Inequaltiy and Distributive Justice: A Comparative Analysis of Mainland China and Hong Kong”, The China Quarterly, 200, (2009), pp 1033-1052, doi:10.1017/S0305741009990610, available at http://journals.cambridge.org/abstract_S0305741009990610 [Accessed on 11 June 2013]
[3] Ibid, p 1036
[4] See note 1 above, p 7
[5] Hong Kong Census and Statistics Department, “The Ageing Trend of the Hong Kong Population Continues” available at http://www.censtatd.gov.hk/FileManager/EN/Content_1064/B1_E.pdf [Accessed on 15 July 2013]
[6] Global Property Guide, “Residential Prices Surging in Hong Kong!”, 15 February 2013, available at www.globalpropertyguide.com/Asia/hong-kong/Price-History [Accessed on 15 July 2013]
[7] Rating and Valuation Department, The Government of the Hong Kong Special Administrative Region, “Rental Indices for Hong Kong Property Market” accessed at http://www.rvd.gov.hk/doc/en/statistics/graph1.pdf [Accessed on 15 July 2013]
