Henry K C HO: Home Purchases Should Be Allowed in The Greater Bay Area

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The “Greater Bay Area” (GBA) is undoubtedly one of the key focuses of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC) meeting in March this year. Thirty-six NPC delegates signed a petition to urge the Central Government to launch the “Bay Area Policy”. With the Outline Development Plan for Guangdong-Hong Kong-Macao GBA to be promulgated shortly, and the completion of three major infrastructure projects[1] the GBA has entered the implementation stage. Policies inhibiting the integration of Hong Kong into the GBA are likely to be optimized, modified or even withdrawn.

 

The One Country Two Systems Youth Forum released a research report “Identity and Treatment Issues of Hong Kong People Studying and Working in the Mainland” in October 2017, the first-of-its-kind in Hong Kong. The report indicated that difficulty in property purchase was one of the considerable concerns of Hong Kong people in the Mainland. This issue was highlighted by Wang Rong, the Chairman of the Guangdong Provincial Committee of the CPPCC. He proposed that the policy could be relaxed in the GBA. This is indeed encouraging and would remove barriers to realising the “one-hour living circle” in the Greater Bay Area.

 

In fact, the “limited purchase policy” imposed on Hong Kong people in most cities in the GBA (i.e. to submit local working proof to buy a property) was a relatively new policy measure for only two to three years. Prior to that, Hong Kong people could purchase a property in any city in Guangdong without any conditions attached. As we all know, from 1990s to 2000s, many Hong Kong people (mainly the elderly) bought property in large-scale housing estates in the Pearl River Delta region. Without these “Greater Bay Area Pioneers” , the history of some of the largest property developers in the Mainland (such as Country Garden and Agile Property) mayhave been re-written.

 

Property – the most sensitive policy

 

Housing policy is perhaps the most concerned but sensitive policy of all Chinese. In Mainland cities, the limited-purchase policy is applied to three categories of people. The first category is local residents who are basically allowed to own one property. If they want to buy more than one property, limitations will be applied on the loan size and interest rates. In some cities, they are even prohibited from buying a second property. The second category is non-local residents. They need to work locally and to contribute to social security (many cities require a five-year social security record) to be eligible to buy a property. The third category is “foreign persons”, including Hong Kong people. The policies for this category are the most complicated, and the inconsistent policies are different in different cities throughout the country have caused a lot of confusion. Hong Kong people can buy a property when working locally, but they may not be able to apply for home mortgages from mainland banks. The definition of “work” may vary as well. The most stringent definition will require the submission of social security certificates (but many Hong Kong people do not buy social security in the Mainland), as well as tax certificates or employment contracts. The purpose of submitting these certificates is to ensure that the property is for self-use rather than investment.

 

It is true that the “purchase restriction order” has been introduced throughout the country to curb the soaring trend in property prices. Guangdong is no exception. As a result, home purchase policies for Hong Kong people have been tightened. However, the Greater Bay Area has become a key development region for the country, and the policy of restricting the purchase of property by “foreign persons” is no longer appropriate and should be optimized or even substantially revised.

 

The 19th CCP Congress report established the general policy of Hong Kong’s integration into the master plan of the country and suggested that some of the differential treatment of Hong Kong people due to historical reasons or management needs should gradually be abolished. This is also the fundamental reason for the Central People’s Government to study and introduce various measures to facilitate the migration of Hong Kong people in the Mainland in recent months. Therefore, the practice of categorizing Hong Kong people as “foreign persons” is debatable and incompatible with the “main theme” of “integration into the country’s development”.

 

As far as the development of the Greater Bay Area is concerned, the restriction policy is even more outdated and defeating the goal of creating a “one-hour living circle”. The free flow of people is essential to the success of the GBA, and the definition of “self-use property” should not be confined to one city if Hong Kong would take the lead in integrating into the Greater Bay Area. With the completion of the three major infrastructure projects, it is foreseeable that in the next 10 years many Hong Kong people will choose to live in the Greater Bay Area, while retaining their jobs or business operations in Hong Kong. The lifestyle of “living in Shenzhen, working in Hong Kong” or retiring to the Greater Bay Area will likely be common in the future.

 

Relief of high property prices in Hong Kong

 

Some people think that the opening up of the property market in the Greater Bay Area may boost speculation and lead to higher local property prices which would violate the nation’s policy of curbing excessive growth of property prices. This is the right question to be asked at the wrong time. Looking back to 15 or 20 years ago, when China’s property market was still underdeveloped and the market share of foreign companies was not low, Hong Kong’s capital might have been able to speculate on high property prices in the Mainland. However,the current housing market in the Mainland is basically driven entirely by the mainlanders. Even if the restrictions were lifted, the proportion of Hong Kong people’s purchasing power in the property market of the Greater Bay Area is still very small when compared to the locals and non-local residents of the Mainland.

 

Attractive property prices and satisfying the aspiration of owning a property are the two benefits of allowing Hong Kong people to buy property in the GBA. Property prices vary by up to a factor of 10 among the nine cities in the area. Properties in the city centre will also be much higher than the average price. For example, property prices in the Nanshan area of Shenzhen are over $10,000 per square foot, while in the eastern part of Shenzhen near the future Liantang Port, it is only about $5,000 to $6,000 per square foot which is only about half the property price in the northern New Territories and one third or less of the property price in the urban areas of Hong Kong. Property prices on the west bank of the Pearl River, such as Zhongshan or Zhuhai, they are as low as $1,000 to $3,000 per square foot. Buying a property there will be very attractive to retirees or those who do not need to return to Hong Kong frequently.

 

Apart from allowing Hong Kong people to buy property, providing mortgage services is also an essential element. The above research report stated that many Hong Kong banks were willing to use Hong Kong interest rates to take on mainland mortgages years ago, but in recent years fewer banks are willing to do so. It is because Hong Kong property price have soared and profits of local mortgage is much higher. If the property market in Greater Bay Area are open to Hong Kong people, I believe banks in Hong Kong will provide lower interest rates than mainland banks in mortgage services to attract more property owners.

 

Unified eligibility of purchasing property required

 

It has been suggested that the nine cities in the Greater Bay Area should become one area, and the term “self-use housing” should be redefined for Hong Kong and Macau people, while restrictions should be imposed to prevent speculation. First of all, every Hong Kong person can purchase one property for self-use in the Greater Bay Area without providing any work proof. The property cannot be rented out, and 5 year holding period is required before reselling the property. This is to ensure that while Hong Kong people enjoy the convenience of the “One-Hour Life Circle” in the GBA, it would not become a catalyst for further speculation in the property market. In addition, the policies of Hong Kong employees purchasing property in the Greater Bay Area are different. It has been proposed that measures on eligibility, required documents and mortgages should be unified. The implementation of these measures will play a positive role in promoting the integration of Hong Kong people into the Greater Bay Area.

 

From Henry Ho & Gordon Lam (ed.) A Debate of Two Systems, p.91

Original from:Guandian, Ming Pao.

[1] Hong Kong-Zhuhai-Macao Bridge, High-Speed Rail and Liantang port