Hong Kong Families Struggle With Pricey Homes

Hong Kong Chief Executive Carrie Lam officially announced a new “Starter Homes” scheme this month to help middle-class families own their first home.

A 27-year-old bank employee, Jeffrey Chan, was left unmoved by the announcement. The combined income of Chan and his fiancee is about HK$7,000 ($897.01), which is short of what they need to qualify to buy a subsidized apartment with the new “Starter Homes” scheme.

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.”

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 meter), according to property agency Midland Realty.

A recent UBS report saw Hong Kong as one of the world’s most expensive city for apartments, in which the average living space is just 150 square feet (14 square meters) per person.

“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.

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 Lam added that it gave few other details in her maiden policy address, other than launching the first 1,000 units by the end of next year.

While Hong Kong’s private home prices took a jump up 160 percent over the last decade, the price hike was especially steep with apartments smaller than 40 square meters (430 square feet), 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 center, 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.”

That is why you need an expert broker to guide you through the process of insuring your home, because you never know how the housing market or government policies can impact how you pay, or how your house is covered.

Finding the right homeowners insurance to avoid problematic claims, especially on the looming housing market such as the one in Hong Kong.