HONG KONG: "Where is all this heading?" The question is being asked everywhere as young middle class couples read accounts of luxury apartments selling at wantonly extravagant prices and ask how long it will take before the trickle down hits them and moves the dream of owning their own home in the city out of reach. Just where is it going?

Will Hong Kong be forced into building mega structures taller than anything dreamed of before - start building high rises on Lamma Island, and set out on a course to gobble up every bit of available land?

Some experts say it's already too late and that young urban couples hoping to buy an apartment in the city are not being realistic. They should plan to become suburbanites and be prepared for long commutes. On the other hand some say the whole housing scare for young couples is over-stated and that as the saying goes, the universe is unfolding as it should.

"We save several thousand dollars a month, but there is still a long, long way to reach HK$1 million for the down payment," Benny Law said, as he dropped into the sofa of his living room. Photo frames, TV remote, and baby toys perched on the back of sofa seemed to resonate their concurrence with Law's frustration, shuddering as his weight landed heavily on the seat cushion.

Law explained his family's plight - he, his wife, his baby daughter and his parents share a 600-square feet two-bedroom apartment in Lam Tin, Kowloon. Law and his wife have been trying to buy their own place since they got married two years ago. They're still struggling to put together a down payment. "We really want a space of our own, especially after the baby came," he said, "but it will cost at least HK$3 million."

There are some cheaper apartments of around HK$4,000 per square foot. But they're so far away that moving out into the hinterlands would mean more than an hour in traffic. Law works in Central. "That would be very difficult for us, because my wife also works and needs to take care of our baby daughter at the same time. Our working hours are long enough as it is," he said.

The professional middle class is long established as the traditional backbone of the city. Today, their lives are decent enough, but the future looks cloudy. Many worry that the dream of owning their own home may move out of reach.

The situation facing the young middle class is also drawing the attention of sociologists.

"The income and lifestyle of the middle class has become detached from reality," said Raymond Wong Sin-kwok, professor of social science of the University of Science and Technology. The middle class today wants things the way they were "before". That means owning a house in the urban core, not far from work, convenient for their kids to get to school, close to social amenities. That may be the ideal that couples dream of but realistically it's part of the past, Wong said.

Young families today are not likely to be able to afford a home like that. Not only the middle class market is being squeezed: "The apartments built in Hong Kong are getting smaller and smaller, while more luxury homes over 1,000 square feet are emerging," he said.

Whether this phenomenon of a squeezed middle class will become a social issue is not yet clear, he said. But if more young middle-class people keep feeling that they have become disenfranchised and can't afford a house, it will surely become a major social issue, he said.

Let's look at Benny Law again. Thirty-year-old, he's worked as a computer engineer for eight years. In the first few years after graduation, social life and dating took a big chunk of his paycheck. Then he got married. Then along came a baby daughter. The expense of having a young family soon took over. Law and his wife barely had enough time to start saving money before the baby came. Law and his wife are not alone. That's the reality for many, many young couples in Hong Kong today.

When one looks at the shortage of developable land in Hong Kong, the rising cost of real estate which follows along in tandem, the future appears uncertain for young people like Law and his wife.

"The increase of property prices is much faster than that of the income of young middle-class people. I feel that the house prices and their financial affordability have become disengaged," said professor Francis Wong, who studies affordable housing in his research at Polytechnic University. House prices are rather high in Hong Kong. Ten years' income is usually used as an indicator to measure house prices internationally. "However, Hong Kong people usually need 15 to 20 years' income to buy their own homes," Wong said. That's the reality of today's housing crisis for those who are newly married and even those still attending secondary schools.

According to government statistics, the price for an average-sized apartment of 430 to 750 square feet on the Hong Kong Island recently has reached over HK$7,000 per square foot. "Buying a flat in the urban area will cost at least HK$4 million," said Wong Leung-sing, associate director of the research department in a real estate agency, who has worked in the property industry for over 20 years. "Those buyers (of these properties) are seldom first-time-home-buyers, mostly they are people who already have a smaller apartment and are changing to a bigger one, or they are property speculators," he added.

"There are few young middle-class people buying houses in the Hong Kong property market," Wong said.

None of these gloomy perspectives suggests that there are no affordable apartments for young people. Those apartments simply are not in the traditional core Hong Kong neighborhoods. Apartments that are affordable for the new, young, middle class are in the New Territories for the most part. Flat prices there already are over HK$3,000 per square foot, according to Wong Leung-sing. "Those who have worked for five to six years are usually able to buy a flat. With a monthly income of over HK$20,000, you can buy a Home Ownership Scheme (HOS) flat. With a monthly income of HK$30,000, a private apartment is affordable.

Wong Leung-sing believes the housing issue facing the young middle class is rooted in the gaps of wealth in a capitalist society. The accumulation of wealth over generations has created a huge and ever widening gap between rich and poor. He said that unequal distribution of wealth is to be behind Hong Kong's terribly twisted real estate market. "Many young people who are well-educated, university graduated or better, have worked for years, living in public houses with their parents, now wish to buy their own houses. Maybe they still can't afford it even though they are well paid. Their parents are not able to help them on their down payment, or they don't have much left to save after making payments on their government college loans," he said.

Is there any reason for young middle-class couples to take heart? Some experts say yes. Things are evolving in an orderly way and there's still plenty of developable land to make the dreams of young people possible. We'll examine their views in part two of our report.

Editor's note: This is the first part of a story of fading and failing dreams of home ownership, of a crisis in the making that is challenging and frustrating home-yearning middle class couples.

A problem with social as well as financial dimensions, unaffordable housing is pushing the dream out of reach and out to distant suburbs.

(HK Edition 10/22/2009 page1)