Residential-unit supply on increase
Supply of residential units is expected to rise further in coming years as developers step up construction of new projects.
A rebound in building consents was recorded last year with sentiment for private sector residential development picking up on an improved market environment after the Government's resumption of land sales since April.
Government-approved development plans increased 15 per cent year-on-year last year to 18.2 million square feet, in terms of total usable floor area.
Private housing starts numbered 42,789 flats, up 32 per cent compared with the 32,383 in 1998, according to government figures.
Those figures also showed there was a shift in focus of developments from larger flats to smaller flats.
The figures also reflected revived interest from developers in starting new projects.
In 1998, planned residential developments decreased 10 per cent in terms of usable floor area and 18 per cent in terms of unit numbers.
The residential category includes developments under the Urban Improvement Scheme of the Hong Kong Housing Society but excludes those under the Private Sector Participation Scheme.
The 32 per cent increase in the number of units started would provide a sufficient supply of homes to cushion any increase in property prices, analysts said.
Securities house Donaldson, Lufkin & Jenrette's projections revealed there was unlikely to be a shortage that would raise private housing prices beyond a modest recovery.
Even if a temporary shortage did arise, it expected people were unlikely to feel squeezed sufficiently to engage in wide-spread speculation.
It was the shortage of physical supply and the dearth of information about future supply that created the speculative boom prior to the Hong Kong handover and ahead of the financial crisis, it said.
The securities house said there was no evidence to suggest these conditions would reappear.
Government figures showed completions of new private residential flats surged by 59 per cent year-on-year to 35,300 units last year, the highest in recent years.
As a result, the vacancy rate of private housing rose from 4.5 per cent at the end of 1998 to 5.9 per cent at the end of last year.
Government indices showed private housing prices dropped five per cent last year and rentals fell 3 per cent.
Compared with the peaks in the third quarter of 1997, flat prices and rentals at the end of last year were down by 46 per cent and 30 per cent, respectively.
According to figures provided by the Buildings Department, commercial property development continued its downward trend last year, having decreased by 27 per cent to 3.08 million sq ft of usable area.
This followed a 34 per cent decline in 1998.
Planned developments of industrial property increased by 22 per cent to 914,900 sq ft last year from 742,700 sq ft - compared with an 85 per cent fall in the preceding year.
The Government said the rebound in building consents should lead to greater private sector building output this year.
Major projects due to start or intensify this year include Cyberport in Pokfulam, developments at Olympic Station and Sun Hung Kai Properties' residential project at Leighton Hill.
Also included are various residential developments in Tseung Kwan O, Ma On Shan, Siu Sai Wan and Tung Chung, and a large hotel-office development planned by Cheung Kong (Holdings) in Hunghom.
Private sector expenditure on building and construction is expected to bottom out in the early part of this year and stage a more visible pick-up later in the year, according to the Government.
Growth of expenditure in the public sector will also accelerate due to construction work on West Rail, the Ma On Shan-Tai Wai rail link and an escalation of work on the MTR Tseung Kwan O extension.
Site formation of the Disneyland project on Lantau Island will also start.
The Government forecast overall public and private construction expenditure would rebound to a growth of about 6 per cent this year.
That marks a turnaround after last year's 11 per cent fall.