Millennials in the world’s priciest home market are going to extremes to ensure a simple roof over their heads don’t eat up the entirety of their income.
With the average price of used homes in Hong Kong hitting record levels over the past year — at $1.28 million in the first quarter of 2018 — and with the median home costing 19.4 times more than median annual pre-tax household income, millennials are increasingly willing to illegally squat in industrial buildings just to stay in one of the most population dense cosmopolitan centers on earth (one now-demolished neighborhood, for example, had a density of well over 1 million people per square kilometer).
A new report in Bloomberg chronicles just how far affordable home-seekers are willing to go: “The rents nowadays are very unreasonable,” 32-year-old photographer Wah Lee told Bloomberg. “There’s no way for me to afford those residential units.”
Lee is one of perhaps 15,000 to 20,000 or more people now living in an industrial building in order to afford living in the city (an estimated 12,000 people lived in industrial buildings in 2016, according to the Society for Community Organization, and that number has rapidly grown).
The 32-year old told Bloomberg he pays HK$11,000 (or US$1,400) monthly, which is less than half what a typical residential unit in the area goes for.
He shares the building with others renting in a legally ambiguous situation that the city would deem squatting, and has as neighbors a commercial meat roasting kitchen and an herbal-oil company.
The risks and discomforts Lee and others are willing to face to save on rent include “irritations such as rust-tainted water and intermittent blackouts, there’s one major drawback: Such living arrangements are illegal.”
Residential use use of industrial buildings is officially banned and recently there’s been a proposal adding criminal sanctions for violators, something which in years past authorities have perhaps turned a blind eye to.
However, the Bloomberg report notes that this changed after a recent tragedy: “Those risks were highlighted when a fire ripped through a unit in an industrial building in the New Territories in August last year, killing three people.” It was discovered the building had 17 illegal subdivided units on the floor where the fire occurred.
Experts say that unlike New York or San Francisco, where high prices are due largely to a simple lack of building space and high demand, Hong Kong’s soaring prices are driven by outdated land use laws and horribly short-sighted management, as well as outside wealthy speculators and developers competing to outbid each other.
A recent Vox report describing the forces at play behind the ridiculously fast-surging land and property prices that keep 75.6 percent of non-built-up areas from being used.
But while some experiment with “nano apartments” — which involves turning unlikely spaces like drainpipes into tiny living units — or 40 sq.ft. “cubicle” apartments and even what are dubbed “coffin homes”, squatting in an industrial building brings a level free movement and open-air unparalleled for the price.
Bloomberg describes: “Along with a small kitchen and private bathroom, the 1,000-square-foot apartment features high ceilings and large windows, unusual by the standards of Hong Kong’s often poky apartments.”
The government has ordered industrial building owners to push tenants out while at the same time currently reviewing 18 options to increase land supply; however, legalizing living in industrial buildings isn’t one of the options.
While people out of desperation seek “coffin homes” on the one hand, and airy but riskier (safety-wise) industrial squatting units on the other, here’s the central irony as express recently in the Nikkei Asia Review: While real estate in Hong Kong accounts for nearly 20% of its gross domestic product, the combined market capitalization of the top four local real estate companies has increased by some $4.52 billion over the past year.
So while thousands live in warehouses and sometimes literal cages, the trend remains that: Continuously rising property prices have shored up the Hong Kong economy and brought prosperity to the autonomous Chinese territory.
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Author: Tyler Durden