Hong Kong for some time now has been under the land supply limitation policy adopted by the government. The limitation of land sully has had a great influence on the real estate industry and the economy of Hong Kong as a whole. This paper examines empirically the effect of land restriction on the industry and the economy both directly. The land restrictions by the government came to control the housing prices in Hong Kong. This paper argues that there is no clear relationship between the general supply of land and the prices of housing. Hong Kong’s real estate industry is characterized by a high rate of appreciation, a clique of a small group in the real estate industry, and a relatively huge public housing sector (Evans 87).
Land supply and house price
One would argue that increase in housing supply would ultimately lead to an increase in the supply of housing capital. This is expected to lead to an increase in demand for land. One should remember that policies established by the government could make disable this assumption. This is because the policies are market-based. Policies are made not to influence the market but to fit into the market. This is actually what the government of Hong Kong is doing. The government does this by releasing land when the market is booming. This could even be traced back to what happened during the property recession of 1883 to 1884 where land sale was put on hold due to the fall in the prices of land. Land sale restrictions would only lead to anticipation by layers in the market of a reduction in supply. In such a situation developers and real estate players would capitalize leading to higher housing rates (Li 79).
The economic implication of the land supply limitation adopted by the government of Hong Kong
The policies adopted by the government in Hong Kong would ultimately lead to reduced foreign investments in the city reduced foreign investments. The long procedure adopted by the government on the property and land acquisition will shy away from the investors. The foreign investors will shy away from the real estate industry in Hong Kong due to a lack of confidence just like since the government is in total control hence the security of their investments is not assured (Gugler 102).
The land supply limitation adopted by Hong Kong would result in a loss of revenue to the government. While the Zoning would lead to reduced land available for development, this would result in more development of residential buildings as opposed to private buildings. This is supported by the fact that the city is forced to grow outwardly. Residential buildings would ultimately generate less revenue in form of direct taxes (Sing 25).
Conclusion
For an economy to thrive there is a need for increased savings. The zoning is pushing several Hong Kong residents out of the city. This has led to reduced levels of savings by individuals due to increased expenditure on Transport. On a positive note, the zoning regulations would ultimately lead to the improvement of infrastructure in the outskirts of the city. The land supply limitations by the government in Hong Kong will lead to getting a good amount of revenue from increased revenue from land. In conclusion, the land limitation policy is likely to be more negative than positive (LaSalle 109).
Works cited
Evans, Alan W. Economics, real estate and the supply of land. New York: Wiley-Blackwell, 2004.
Gugler, Josef. World cities beyond the West: globalization, development, and inequality. Cambridge: Cambridge University Press, 2004.
LaSalle, Jones Lang. The little book of real estate definitions: Asia Pacific. New York: John Wiley and Sons, 2006.
Li, Ling-hin. Development appraisal of land in Hong Kong. 2nd ed. Hong Kong: Chinese University Press, 2006.
Sing, Ming. Politics and government in Hong Kong: crisis under Chinese sovereignty. New Jersey: Taylor & Francis, 2009.