Ontology, Policy and the Market: Trends to Home-ownership in Hong Kong

Abstract

An important trend in housing delivery internationally has been rising rates of home-ownership. In Hong Kong, owner-occupation has expanded rapidly over the past two decades, and this is expected to continue. This paper seeks to account for trends to homeownership in Hong Kong. It is proposed that two principal factors account for rates of home-ownership internationally: the interaction and combined outcome of housing affordability and household preferences-the 'market explanation' for tenure choice; and the 'ontological explanation' of home-ownership as a preferred household tenure choice, which assumes that ownership is the innately preferred tenure form. On face value, Hong Kong presents a relatively persuasive case for the ontological explanation for trends to home-ownership. Yet the ndings of this paper suggest that the decision to buy appears to be systematically explicable by market factors: in the private sector, primarily by investment considerations, namely high returns to residential property investment and favourable user cost of housing capital; and, in the public sector, by a very ne-grained approach to household affordability with publicly assisted homeownership initiatives. Hong Kong demonstrates again how carefully families weigh the bundle of services associated with their tenure options. The government plans to expand home-ownership further, yet there are major systemic implications for such an expansion.

Assisted homeownership, investment and their roles in private property price dynamics in Hong Kong

“…In short, homeownership is considered a form of retirement saving. This is supported by La Grange and Pretorius (2000), as high rates of ownership can be explained by two factors relating to one's investment preferences: the very high returns to residential investment (demand factors) and the low (and often negative) user cost of housing capital (financing mechanisms). The investment factors are relating to, rather than independent from, the general financial-sector institutions and regulatory imperatives.…”

“…Yet, such "innate and natural" home buying behaviours all but vanish once property prices fall. In the words of La Grange and Pretorius (2000), "ontological perspectives of homeownership do not sit easily with a highly sophisticated market economy. "…”

“…According to La Grange and Pretorius (2000), since the mid-1980s, assisted homeownership had been used as a tool to encourage the transfer of wealthier public tenants to which, in order to accommodate needy families and so reduce the length of the queue for public housing. The mechanism of the scheme is that the well-off PRH tenants either are required to pay double-rent for the PRH, or move to HOS housing.…”

Shifts along the Decommodification-Commodification Continuum: Housing Delivery and State Accumulation in Hong Kong

“…This premium is, however, mitigated by the favourable conditions of access to THE DECOMMODIFICATION-COMMODIFICATION CONTINUUM HOS units, including the purchase of only part of the unit, a lower household equity contribution and guaranteed access to mortgage finance at below-market interest rates. Buyer interest in Hong Kong housing is heavily focused on new property and much of the existing housing stock can be regarded as functionally obsolete, in that it does not meet the tastes and preferences of home buyers (La Grange and Pretorius, 2000).…”

“…Thus, a case can be made that the Home-ownership Scheme Income Limit establishes the de facto affordability cut-off point for home-ownership to a significant degree. Although sitting public tenants are not means-tested to participate in the HOS, many of them have incomes below the income eligibility level as do all participants from the private sector (La Grange and Pretorius, 2000). Thus, between 1987/88 and 1994/95 (the period for which we have statistics), nearly 80 000 sitting public tenants purchased HOS flats, of whom nearly twothirds had incomes below the income limit.…”