An inquiry into the relationship between Hong Kong's current economic crisis and housing policy
Hong Kong Institute of Asia-Pacific Studies
The recession in Hong Kong beginning in 1998 is unprecedented not only because it represents the first incidence of negative growth in GDP since official growth data became available in 1963, but also because of its depth (-5.0%) and because of the failure of the economy to recover from the recession. The official explanation for the recession is the Asian Financial Crisis (AFC), but the AFC can hardly compare with the many crises that Hong Kong has weathered in the past, including the Cultural Revolution of the 1960s, the oil price shock of the 1970s and the resulting global recession (the Hang Seng Index fell more than 90% from 1973 to 1975), and the real banking crises of the 1960s and 1980s, which witnessed the failure of a number of banks. By contrast, during the AFC, not a single licenced bank failed.
An alternative explanation of the recession is given by the author, who argues that a misguided housing policy led to the collapse of the housing market and is the cause of its failure to recover. Evidence is presented for the theory that the Tenants Purchase Scheme (TPS), which offered sitting tenants the opportunity to buy their own units at deeply discounted prices, played a key role in the collapse of the housing market. Public housing tenants had been a significant player in the private housing market and, in particular, had been the main purchasers of Home Ownership Scheme (HOS) housing. TPS essentially lured potential HOS and private housing buyers back to buying public housing flats instead. When they stop buying, private flat public housing flats instead. When they stop buying, private flat owners and HOS owners cannot trade up. The housing ladder was therefore severed. In addition to this effect, the huge overhang of supply created after 1997 also played a key role in preventing the housing market from recovering, notwithstanding a pick-up in exports.
Housing being the main store of wealth for Hong Kong’s middle-class households, a collapse in housing prices produced a huge wealth effect, curtailing consumption and private domestic investment. Unemployment therefore shot up quickly. A collapse in housing prices is the key explanation for the emergence of deflation from late 1998.
始於1998年的經濟衰退對香港來說是空前的。在此之前，打從1963年政府開始公布經濟增長數字以來，沒有一整年錄得負增長的情況。而是次負增長幅度達5.0%，其後的復蘇又軟弱無力。官方的解釋是受到亞洲金融風暴的影響，但香港多次經歷過比亞洲金融風暴更艱險的危機，卻屢屢化險為夷。60年代的文化大革命；70年代的石油危機及隨之而來的全球性經濟不景 (1973年至1975年間，恆生指數下趺九成多)；60年代和80年代的銀行危機 (都涉及銀行倒閉)，都是重大的震盪。相反，在是次「金融風暴」中，一間銀行也沒有倒閉。
Ho, L. S. (2003). An inquiry into the relationship between Hong Kong's current economic crisis and housing policy [Monograph]. Hong Kong: Hong Kong Institute of Asia-Pacific Studies.