Photo by 发课 吴
Since the end of 2015, property values have been heating up throughout China. In over 15 cities, home prices increased over 20% since September 2015. Although home prices have been steadily climbing for over a decade, the past year recorded the largest jump since 2010.
Home prices in Shanghai, Shenzhen, and Dongguan recorded over a 40% (source in Chinese) increase in less than a year, which makes property value in China’s largest cities comparable to international hubs such as New York and London. However, home buyers do not get nearly the value for their money. Homeowners in China only enjoy the right to use the property on long lease terms. Most residential property contracts grant a 70-year right of use, and the policy for renewal terms has not yet been clarified. These lease terms not only determine the limited rights of owning a home, but also dictate the quality of construction.
The recent sharp rise in real estate prices was triggered by loosening measures introduced during Q1 of 2015. On the one hand, policymakers want to clear the excess inventory of surplus properties. According to various sources, there are an estimated 64 million to 1 billion vacant apartments across China, the vast majority of which are located in less economically-stimulating cities and towns. On the other hand, in large cities where there are more job opportunities, overcrowdedness and housing affordability are top concerns. Since March 2015, there were two rounds of interest rate cuts and loosening measures on down payment and property transaction regulations. Such loosening measures, meant for de-stocking vacant homes, evoked the fastest climb in property values throughout China, and mostly manifested in large cities.
A few reasons are often cited to justify that this blow-up is grounded in the real demands for housing in major cities – 1) Rapid urbanization continues to drive rural population to urban areas, 2) the nation’s GDP still grows at a steady pace, although less than before, and 3) the recently announced two-child policy creates higher demand for housing.
Beyond the real needs for housing, the investment value of real estate largely inflated the housing prices. Property investment has been a trusted way to get rich quick for many Chinese investors, and the profit chain has amplified any increase in housing price that is rooted in real housing demand.
People in China trust real estate investment because it has never failed in the past. There have been many times when people thought China’s property prices would finally come to a cooling period. However, the implementation of cooling measures to limit investment purchases never prevented prices from growing for very long. Following the surge in 2013, policies limiting investment home purchases mildly pulled down prices since the end of 2013. However, in less than one year, home prices recovered to historical highs and kept growing at an unprecedented pace.
It is not only homeowners’ accumulated wealth from capital gains on their properties- there is also a chain of profitability from land sale, to developers, to the construction industries, to real estate agents, and many other middlemen in between. Today an average 2-bedroom apartment in Beijing or Shanghai is worth over 1 million USD. Although plenty houses remain unoccupied, housing prices have never dipped since the original commercialization of housing in 1978.
Since China’s housing stock faces conflicting concerns, over-supply in some locations, and overheated in others, targeted policies at the local level may help ease the gap. Just this month, a handful of cities published new cooling measures, including Beijing which now requires the highest down payment of 35% for first time home buyers and Guangzhou banning owning third properties.
These local policies are not yet effective due to the lack of a consistent network for home ownership across the country. Specific measures could be controlled at the local level as investment is nonetheless bounded by locality. Yet because registration networks generally do not communicate across geographic boundaries, real estate investors can easily find their next deal somewhere else. A coherent and nationally connected network could really help both local and the central governments to effectively implement mitigating policies.
Shanghai Street. Photo by Henry Nee
This article by Harry den Hartog originally appeared at Sixth Tone.
One of the first things that struck me when I came to Shanghai was the wide variety of lifestyles on every corner. Farmers just off the train from the countryside sat on sacks of rice beside elegant office ladies chatting away on cell phones. It reminded me of New York City: a melting pot where people from every section of society are thrown together each day.
Shanghai is both a futuristic and a traditional city. It is international and urban, but also retains many rustic elements, as evidenced in the daily lives and habits of many of its citizens. This creates an attractive mix of lifestyles and cultures, which I think is good for a city. Although the chaos and conflicts that sometimes ensue when this happens can be annoying, it also gives a place character and reminds us of our roots.
Urbanization normally refers to the movement of rural populations toward a city. But Shanghai and other Chinese cities serve as evidence that urbanization is often much more complicated. In essence, it’s about change of lifestyle. The divide between rural and urban is more obvious in China than it is in any Western country.
I grew up in the Dutch countryside. My grandparents used to be farmers. Peeking out from my upstairs bedroom window I could see the glimmering, seductive lights of Rotterdam — home to Europe’s largest port.
Although life in the countryside was peaceful, pleasant, and safe, the city always attracted me with its unlimited potential. It seemed to me the best way to meet interesting new people, gain new ideas, and learn more about the world.
I thought the village where my family lived was dull and dreamed of escaping at the first possible opportunity. Moving to Rotterdam for my university studies only expanded this desire. I yearned for a megalopolis. I needed a New York City, a Paris, or a Shanghai.
The city offered me a means of developing myself, my career, and allowed me to meet new people and face new challenges — ambitions shared by many young people across the world. This holds true in China as well, although because of living standard disparities between rural and urban regions, many people also migrate simply to improve their quality of life.
Rising inequalities between cities and their surrounding countrysides result in an unfair system where one set of citizens lives much better than their neighbors. In China this situation is exacerbated by thehukou, a system that ties people to where their household is registered.
China has a rich and long agricultural history. But although China’s agricultural methods have often been much more advanced than other countries throughout history, many Chinese nowadays view rural areas as backward and unappealing.
Personally, I love the countryside. However glamorous the Shanghai life can be, I often long to return to my small Dutch village. I strongly believe that rural and urban areas are becoming increasingly polarized, and I think that metropolises need to search for a way to become more balanced with the countryside. One way to do this is to incorporate more rural elements into city life.
In 2012, the environmental protection organization GoodtoChina launched SkyFarms: a project that installs rooftop gardens where crops are grown around Shanghai. In 2015, a farmer named Fred Young initiated the Rainbow of Hope project, which delivers organic food grown by rural farmers directly to urban dwellers.
The target consumer for these two projects is Shanghai’s rising middle class — a group that rarely has any contact with farmers. This lack of connection is why I really enjoy seeing people from the countryside next to polished white-collar workers.
What has always fascinated me most about Shanghai is its mix of rural and urban lifestyles. Unlike New York, Berlin, or Tokyo, each street in Shanghai offers fresh food that was brought in from a nearby field that morning.
This gives a lot of variety to this city — something that supposedly more “civilized” cities like Paris or London are lacking. China should embrace the rural-urban qualities of its cities, and continue to develop them into a permanent feature of urban life.
Harry den Hartog is an independent urban designer and author of ‘Shanghai New Towns: Searching for Community and Identity in a Sprawling Metropolis.’
Conceptual Rendering of the Hong Kong “HarbourLoop” Proposal by Lead 8. Image Courtesy of Lead 8 Hong Kong Limited.
From Norway’s cross-country bicycle highway to Copenhagen’s cycling snake, large-scale cycling infrastructure projects around the world are attracting both public and private investments. With Amsterdam appointing its first Bike Mayor and London having cycling as a prominent issue during its mayoral election, pro-cycling campaigns are seizing the moment to normalize cycling as a way of daily transit.
Primarily known for its efficient public transportation system, Hong Kong has not actively explored the potential of cycling on a municipal level. Yet could Hong Kong benefit from getting more people on their bicycles? Would the right infrastructure and pro-cycling campaign create a passion for ground-level, zero-emission transportation?
The city does have a few legitimate excuses for not embracing cycling wholeheartedly: hilly terrain, humid tropical weather, and crowded streets. Yet, with the right infrastructure and political will Hong Kong does have the potential to become a cycling-friendly city.
95% of Hong Kong’s population live on 20% of Hong Kong’s land, the rest 80% remains undeveloped due to its extremely hilly topography. However, a booming city has developed on the flat terrain. According to a study by Lead-8, a multidisciplinary design studio, 1.7 million residents live within a ten minute walk of the harbour front. Since its population is densely concentrated on flat terrain, a small amount of investment in infrastructure that connects active areas could move a large amount of population around the city.
Apart from its hilly terrain, Hong Kong has hot, humid, and long summers. Almost 90% humidity in the summer months makes any outdoor activities less desirable. However, shaded and comfortable urban biking infrastructure could help cyclists enjoy their rides even in the hot summer. Moreover, many workplaces are encouraged to have showers and changing rooms to accommodate cyclists. The newly updated LEED Green Building Guidelines, in addition to bike storage, credits buildings that locate near a cycling network and provide shower facilities for occupants. Weather is never perfect for cycling, but practical solutions are available to make cycling easy and comfortable in Hong Kong’s climate.
How about Safety? The already crowded streets put cycling safety in question. Mostly designed for narrow single or double-lane traffic, the streets are barely wide enough for cars to circulate. However, crowded streets are exactly the reason why Hong Kong should do more to promote cycling. Moving cars around is less space-efficient than moving bikes around. If less street space is dedicated to car traffic, more people could benefit from using safer, and better-connected cycling or pedestrian streets. Tokyo too has crowded streets shared by pedestrians / cars / and bicycles, but it does not stop 85% of its population from owning and riding bikes. A well-connected network in a road-sharing environment will largely off-set the obstacles.
In Hong Kong, only 6.6% of the population travels daily from home to work in private vehicles, and nearly 2/3rds of the population travel by mass transit. Hong Kong is already an efficeint city with regards to transportation, so what added value can cycling and bring? The goal of promoting cycling is not to compete with available mass transit. The real benefit is to provide more options for sustainable and efficient modes of transit. When options are available, people will always choose the best way to get around – the fastest and cheapest way.
Ian Ralph, urban designer at Lead-8, told us, “Hong Kong’s urban planning currently favors longer trips using buses and the MTR. For many journeys under 4km, using a ground-level, well-connected cycling / walking path network would be faster, cheaper and more enjoyable.”
As many excuses as the city for not embracing cycling, the discussion of promoting biking should not be hindered, since it is never easy for any city to adopt an efficient and well-used cycling network. A Hong Kong-based multidisciplinary architecture and design studio, Lead-8, proposed a 23-km urban pathway network – HarbourLoop. This visionary plan presents a biking/walking/running mobility network that connects currently segmented harbourfront footpaths.
While this proposal is grand and ambitious, Hong Kong will have to start somewhere feasible if it is serious about introducing bike-friendly infrastructure. But there are plenty of potential starting points. Hong Kong is not as far from being a cycling-friendly city as we think.
Mei Tung Estate – Photograph by Can Pac Swire via Creative Commons
Hong Kong’s shortage of affordable housing is becoming an increasingly pressing issue – over 30% of the population is currently living in subsidized housing, and the number of people waiting to enroll in the public housing program is growing each day. Because the Government program is so competitive, many residents are forced to live in divided units, cage homes, or rooftop settlements. Increasing rent pressure, inflation, and undesirable living conditions make homelessness the only option for many.
Hong Kong is a rich city, but wealth is extremely unevenly distributed. According to a study on 28 Asia-Pacific cities, Hong Kong ranked the lowest on its Gini Index – a measurement of income distribution. While the rich enjoy luxury condos with elevated swimming pools, the poor, which makes up about 20% of the population (a total of ~1.4 million people), struggle with ever-increasing housing prices.
“One in three of Hong Kong’s population, over 2 million people, rely on subsidized housing. Waiting time is on average 4 years. Almost half of the population in poverty are working poor.” These are just some of the alarming statistics published by Hong Kong Housing Authority. Although the Housing Authority operates 740,000 flats in 172 Public Rental Housing (PRH) estates, the high demand for affordable housing is not close to being met. As of December 2015, there are nearly 300,000 applicants waiting for an affordable place to live in, and the number is only going up.
As a result, people who cannot wait are forced out onto the streets.
Although homelessness is commonly associated with unemployment, there is a large group of people are in the labor force also suffer from the effects of poverty. In Hong Kong, this “working poor” group accounts for more than half of the population in poverty. In numbers, that is about 700,000 people from working families who cannot provide themselves with basic living needs.
The picture is clear: Hong Kong is expensive, and housing is a huge expense for most people. Price-To-Income (a basic measurement for housing affordability) in Hong Kong is almost double that of New York City (35.8 in HK; 19.5 in NYC). What can low-income residents do? Some have the patience to wait in extremely inhumane living arrangements until the day a public housing spot opens up: some build shelters on others’ roofs, and some spend their nights at McDonald’s as McRefugees. Most of them live “creatively” day-to-day, because they have no other choice.
How can Hong Kong provide sufficient housing for everyone?
Although the Housing Authority promises to build more subsidized housing, the current lack of supply calls for swifter action.
The problem boils down to supply vs. demand in the number of affordable units. There is simply not enough supply of affordable housing in Hong Kong. When housing is scarce, it becomes unaffordable. Market-rate developers have the upper hand in this game. If the market allows them to build high-end housing and charge the highest rent they can get, they will.
With this in mind, government should look at ways to engage these private developers in delivering affordable and mixed-income units. Given the lucrative high-end real estate market, this might seem like an empty promise. However, effective incentives for mixed-income units will work, and it is proven to be cheaper and faster than relying on public estates to be built by the government. For example, the Low Income Housing Tax Credit (LIHTC) in the U.S. has accounted for 90% of the country’s affordable housing by incentivizing private investors/developers to build low income units.
In addition to providing incentives for low-income housing, encouraging the revitalization of underutilized properties in the city could also help increase land use efficiency, which will eventually drive down housing prices.
There are many vacant industrial buildings in Hong Kong. However, the opportunities to re-purpose these spaces are limited due to zoning restrictions. Most of these parcels are zoned as Unspecified Use Area, which is ironically the government’s scheme to make land-use more flexible. In reality, such a flexibility clause does not make conversion of underutilized properties easy. In fact the complex application procedures and high waiver fees associated with building use conversion make it more appealing for landowners to demolish the old buildings and build anew on these parcels.
As a result, most developers choose to build premium estates to target the more profitable markets. If these rules are relaxed and processes reduced, more underutilized properties could be re-furbished and re-purposed to add to the supply of affordable living spaces.
Instead of solely counting on the Housing Authority to realize affordable housing construction in its the pipeline, we could leverage other approaches to relieve Hong Kong’s housing pressure. While the under-served get creative with their living arrangements, the government should also get creative in solving this housing crisis in a timely manner.
Existing & Proposed MTR Stations, map by Wikimedia
Wong Chuk Hang, one of the most hip “undiscovered” neighborhoods in Hong Kong, is undergoing massive redevelopment thanks to a planned MTR Station. Just as galleries, artist studios, hidden coffee shops, and restaurants started emerging in recent years, the community is now facing rising rents and redevelopment pressures. Will WCH become another transient alternative neighborhood that will soon be overtaken by big developers?
Historically, WCH was zoned strictly for industrial activities. As industrial activities began to die in the early 1970s, many old warehouses were left vacant. Over the past decade, small businesses, especially from the creative community, relocated to Wong Chuk Hang as rents soared in central Hong Kong locations. Slowly, Wong Chuk Hang has become a hybrid neighborhood that houses activities ranging from food processing to artist studios and rock-climbing gyms.
Recent redevelopment in this neighborhood has induced a twofold increase in rent. New ground-up developments coming to the neighborhood are a response to the shortage of office space in Hong Kong and the high rent potential in WCH.
The Factory, 1 Yip Fat Street, Wong Chuk Hang, photo by Ziyou Tian
Is the new development pushing out the emerging creative community and small businesses in WCH? Not entirely, but it most likely will eventually.
Co-ownership is a common practice in Hong Kong, and many of the industrial buildings are occupied by owners rather than renters. The first round of redevelopment targeted single ownership buildings, which were mostly left in bad condition and were barely occupied.
In multi-tenant ownership situations, it is much harder to reach an agreement to sell the building for redevelopment. Currently in WCH, a new office building charges on average 20HKD/sq ft whereas the old building could only generate around 9 HKD/sq ft. No matter how much individual owners want to preserve the original community, the rent gap is becoming too appealing for anyone to refuse to negotiate.
This new development will seriously challenge WCH’s buzzing scene and its vision of becoming the new destination for modern art in Hong Kong. Often, artists are both blamed as gentrifiers and sympathized with as the victims of gentrification. However, in Wong Chuk Hang, this is not the case: the uplift of the neighborhood is mostly transit-driven and the existing settlements will not be forced to relocate, especially if they owned the properties.
Inevitably, the creative community will suffer from the lack of room for growth. Currently, art lovers and culture seekers enjoy getting out of their industrial lifts and discovering the hidden art scenes in WCH. As old industrial buildings are replaced by shinier, trendier, and more well-maintained office towers, affordable and flexible space will be less available for the grassroots alternative community to grow.
“Life will get easier, but Wong Chuk Hang will become another boring neighborhood at the same time”, says the head of the South Island Cultural District and the owner of Art Statements, Dominique Perregaux.
If the rent is already doomed to be too damn high, would the public space improve as part of the neighborhood redevelopment?
New buildings in WCH are shiny and well-maintained by building management companies. However, little has been done outside the boundaries of these new building. Although the MTR station and the new offices that come with it will increase foot-traffic, streets and connectors still remain at a monstrous industrial scale. Crossing streets requires endless detours under the elevated highway. Public space is almost non-existent, and is only hidden under shabby overpasses. While private developers polish their own properties, other desired features of a neighborhood do not seem to make their appearance simultaneously. If the rising rent is not to be controlled, at least government should demand developers to contribute to the public space.
What is the future for WCH? How much longer can this neighborhood remain a cool, hip gem?
As displacement is not so much of an immediate threat to owner-occupied spaces, the existing community may not be forced to relocate in the near term. However, new space available for rent would target a very homogenous group of users — office occupiers who could afford paying high rent. The development-driven transformation in this neighborhood poses a question as to how to sustain or further foster a diverse mix of activities. We need to ask these questions or Wong Chuk Hang, the “hidden gem” of Hong Kong, will soon just become another uninspiring office compound.