The land tenure systemThe land tenure system has been in place in Hong Kong since the early stage of the British colonial era when the entirety of Hong Kong Island was owned by the Crown. After the handover of the city in 1997, almost all land plots in Hong Kong are the property of the Chinese state, as stated in article seven of the special administrative region’s Basic Law. The Hong Kong government has the power to transfer usage rights to real estate developers, companies, and individuals in exchange for financial means, usually through public auctions.
In the early days, leases were granted for terms of up to 999 years, while most new leases are now shortened to 50 years. The leaseholders are required to pay not only the value of the land at the time of the grant but also an annual rent equivalent to three percent of the ratable value of the property, adjusted in step with any changes in the ratable value thereafter. This system was effective in vitalizing the economy, increasing government revenue, and speeding up urban development, to the extent that it was promptly adopted into mainland China in 1992 and has been the basic model for China's real estate sector since its marketization.
Unaffordable housing for residentsWith its hilly terrain, less than seven percent of land is allocated for residential use, resulting in an inadequate supply of housing in Hong Kong. The majority of the city's residents live in high-rise units where living spaces are tight. Despite some fluctuations, the property market in Hong Kong remains consistently competitive, with property prices in the Hong Kong Island area exceeding 186,000 Hong Kong dollars per square meter in 2021, far higher than any other city in the APAC region.
While Hong Kongers enjoy the income levels of a typical developed economy, unaffordable property prices continue to place heavy burdens on residents. As a result, nearly half of all households in the city live in public rental housing provided by the government. Unfortunately, the application and waiting period for public accommodation often lasts several years, resulting in some low-income residents, especially the old and the vulnerable, having to live temporarily in poorly serviced subdivided apartments or even cage homes.