But like most compact cities, Hong Kong suffers from exorbitant housing and land prices due to the restrained supply of developable land. The price-to-income ratio is 20.8 for a median home. There are other compounding land supply factors affecting housing production. Around 78 per cent of land is hilly terrain and the planning process is delayed by increasing politicisation of public affairs. This adds to controversies in planning matters and intensifies public participation in planning processes, increasing uncertainties in the supply of developable land.

The government’s projections for future housing demand are predominantly based on local demographic changes and downplay external demand. As a global city with a low-tax economy and an open housing market, Hong Kong attracts global and regional buyers. Between 2011 and 2012, 32 per cent of buyers in the primary market were non-local or company buyers. Further fuelling demand in recent years is the global financialisation of housing — housing being increasingly treated as a financial investment product rather than a social good.

As all land is government-owned, the government can and indeed does provide public housing on a large scale. Approximately 29 and 15 per cent of the population live in subsidised rental and owner-occupier housing, respectively. Unlike home-owning Singapore, preference is given to providing public rental housing to low-income families, a legacy of providing cheap labour to support manufacturing industries in the 60’s and 70’s.

Also, the ethos of the colonial government til 1997 was to focus on general economic development, not building up household wealth through subsidised homeownership. But the booming real estate market serving the higher-income groups became an economic pillar and so the vibrant housing market overrode the government’s provision of subsidised owner-occupier homes.

Learning from Singapore, the first post-colonial government in 1997 devised a set of homeownership plans to raise the homeownership rate from 44 per cent to 70 per cent. But implementation was aborted due to the Asian Financial Crisis (AFC) which started in 1998. Subsequent governments have been tied up by a short supply of land due to the suspension of new land planning and development for almost a decade during the post-AFC economic depression. In using scarce new state-owned land resources, the current government has prioritised meeting the housing needs of low-income families through providing public rental housing over meeting the homeownership demands of others.

It could be argued that Hong Kong has been adopting a security-based welfare housing policy which has given rise to a dualist liberal–interventionist housing system. The implications are that low-income people, about a third of the population, are housed predominately in public rental housing on long lease. Housing units are small but housing estates are generally well planned and equipped with community and retail services. Residents are generally satisfied with the living environment.

The broken rung in the housing ladder is that of middle-income groups. Housing prices and rent are seeing steep increases and the supply of subsidised owner–occupier housing continues to decline. A consequence is that more small housing units have been built in the market to suit affordability — the proportion of flats of 40–69.9 square metres increased from 40 per cent of the total housing stock in 1985 to 49 per cent in 2015. The average housing space standard was only marginally higher than that of public rental housing which is at 20 square metres per person in 2013–14.

A significant emerging social trend is the social polarisation between homeowners and non-homeowners. The former experiences an exponential rise in household wealth over time while the latter has their homeownership dreams fade away and housing conditions deteriorate with rental rises.

For the young, housing culture has changed. Unlike their parents, becoming a homeowner is no longer a reachable and cherished aspiration. Acquiring a self-contained home is not done by saving to pay for the down payment, but by queuing up for a public rental unit early so that it can be allocated before the applicant’s monthly income increases beyond the eligible income limit. This explains why applications of one-person families comprise 48 per cent of total applications in the public rental housing waiting list. Among the single applicants, 58 per cent are below the age of 30.

In Hong Kong’s dualistic housing system, there exists a symbiotic relationship. Without a public housing sector ensuring housing security for half of the population, an open and vibrant private housing market that is capable of commanding global investment is intolerable for the local community.

But recent social unrest, partially attributed to housing unaffordability and the loss of housing aspirations, may signal that the equilibrium in this system is tipping off. As neighbouring economies continue to grow and seek investment opportunities in Hong Kong, the system’s sustainability is becoming increasingly precarious.

Rebecca L H Chiu is Head of the Department of Urban Planning and Design at The University of Hong Kong.