Housing starts show decline to 10-year low

PUBLISHED : Saturday, 19 January, 2008, 12:00am
UPDATED : Saturday, 19 January, 2008, 12:00am

Home completions and new construction in Hong Kong last year touched a 10-year low as developers held on to limited land inventories to pace their projects.

Housing Authority figures released yesterday showed about 10,500 private residential units were completed last year, down 36.74 per cent from 16,600 units in 2006. Construction began on only 12,900 homes, down 25.43 per cent from 17,300 units a year earlier.

As developers focused on sales of remaining units - selling 3,000 units in the fourth quarter - only 10,000 completed units remained unsold.

Developers also delayed presales of forthcoming projects, selling only 2,000 units in the last quarter, down from 5,000 units in the third quarter.

Industry watchers attribute the slowdown to limited land inventories in private hands. Jones Lang LaSalle regional director Lau Chun-kong said the government should resume land auctions to increase supply.

The completion of new units is expected to be on the low side this year, said Fitch Ratings director Michael Wu, but he maintained a positive outlook on the residential property sector.

On the other hand, slower housing starts do not necessarily mean a shortage of supply.

Midland Realty chief economist Buggle Lau Ka-fai estimated that 55,000 new residential units would come on stream in the next two to five years. As the pattern of the previous four years showed about 17,000 homes sold each year, 'new supply is sufficient for demand over the next few years', he said.

But a balance of supply and demand is not the only factor swaying property prices, industry participants said.

Mr Lau Chun-kong said the record low levels of home completions and new construction had a limited impact on property prices.

'It does not mean property prices will rise once new supply goes down,' he said. 'Interest rates, the economy and income levels have a greater impact.'