In recent years, property prices in Hong Kong have not changed much but has been hovering at a high level. To put it bluntly, there has been no condition conducive to falling prices. Besides, as the city is “being stabilized” politically and the Covid-19 pandemic is still on, excessive amounts of funds will once again flood to the property market. After all, real estate is the leading religion in Hong Kong.

The twisted state of the Hong Kong property market is definitely man-made. Government policies implemented over the past years have driven Hongkongers crazy. A decade ago, a variety of countermeasures were launched to lower the liquidity of the property market and reduce supply of second-hand properties. Not long ago, Carrie Lam’s administration increased the mortgage cap so as to lure people to buy properties. As a result, many homebuyers have bought properties at a higher leverage. The objective result is that the property market has slowly gone up again.

How likely are prices to decline? Despite the political turmoil, the pandemic and the current wave of migration, property prices remain unaffected. The advantage of Hong Kong property owners is self-evident. Statistics in 2016 indicated that 66 percent of Hong Kong families have fully paid for their flats. This means the chances of a repeat of the property market collapse in 1997 are extremely low.

Meanwhile, governments around the world are not in a position to raise interest rates, and so it is difficult for the property market not to rise. For years, a triangle relationship featuring the property market, gold and cash has been well maintained in Hong Kong. In light of gold appreciation and the falling value of cash, property prices have not changed much in recent years. In effect, the property market is underperforming and it may catch up in two to three years. But of course, one should not blindly invest in the real estate market.

When supply of a product increases, its price falls. This is common sense. Properties in New Territories West have a higher risk. Homebuyers should avoid the northwestern part of the New Territories, mainly because property supply in the coming decade, including lands to be sold at government auctions and farmlands, will concentrate in this area. On the other hand, Hong Kong Island can only rely on the redevelopment of old buildings to produce supply and so this part of Hong Kong is a better choice for property investment.

In theory, in the “post-national security law era” the government will focus more on improving people’s livelihood. Taking this rare opportunity to make my voice heard via Apple Daily, I have to talk about the issue I am most concerned about: the government’s rent control policy towards subdivided flats. The government has already announced that it will control the rents of subdivided flats. The original objective of the legislation is to minimize the chances of people in the grassroots sector being exploited. I had experienced tough times when I was young and I know how hard life is for the poor. As a matter of course, I support the government’s plan.

But I also have to declare my interest. I and many members of my association are owners of subdivided flats. We always go by the rules and attach importance to the safety of buildings. What I have observed over the years is that there is no room for demand for this type of flats to fall. Therefore, the only way to protect the interest of people from the grassroots sector is to regulate this market segment, so that there are laws for landlords to comply with and tenants are protected by the laws.

To make sure Hong Kong people live a decent life, the government must not be half-hearted in regulating subdivided flats. It has to take the issue seriously in order to stop landlords from exploiting tenants. Properly regulating subdivided flats will have a lot of benefits, including the following:

1. Landlords can arrange for licensed technicians to install water and electricity sub-meters, and the two power supply companies in Hong Kong can bill residents based on the newly installed sub-meters, so that grassroots tenants can directly benefit from the government’s relief measures and will not have to pay more electricity fees than they should just because of the inclining block rates.

2. In terms of fire safety, landlords of subdivided flats should be required to use legal construction materials. For example, fire-resistant tiles have to be used to partition a flat. For the width of corridors, rules should be drawn up by authorized officials from the Buildings Department. These officials will also make sure the floor load, fire safety regulations, lighting, ventilation and power supply comply with the legal requirements.

3. For windowless bathrooms, I suggest regulating them in accordance with the regulations related to Class 1 Minor Work, so that such bathrooms are exempted from the regulations on subdivided flats.

4. With laws on subdivided flats in place, landlords and tenants owners can protect their rights and interest by taking out home insurance.

I also have to point out that there is a great demand for subdivided flats, and banning such flats will only make life of people from the grassroots sector even harder. Some flats that have already been partitioned for a while need to secure certificates proving that the flats carry no immediate danger. In the future, the authorities should step up law enforcement efforts and ban all units that violate regulations or land use rules, including those at industrial buildings, container houses and pig farms, so as to protect residents’ safety.

(Ken Sir, founder of Associaton of Landlords of Small and Medium )

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