Hong Kong government immigration forecasts wildly exaggerated

Thank you to all the readers who wrote in reaction to yesterday's Monitor about proposals to develop Hong Kong's country parks for housing.

In case you missed it, Monitor argued that the government's forecasts of demand for 470,000 new flats over the next 10 years are massively overstated.

Further, the column maintained that even if the government were to go ahead with plans to construct 470,000 new homes, there is plenty of spare land in the city to accommodate them without building on the country parks.

Feelings on the matter are running high, so in the interest of clarity, there are a few points I should clear up.

First: an apology. When I wrote in yesterday's column that "according to the government's own forecasts, the city's population is set to increase by some 484,000 souls over the next 10 years", I was looking at an old set of figures.

In its latest projection, released in July last year, the government actually forecasts that Hong Kong's population will grow by 593,000 between now and the middle of 2023.

Based on the government's figure for the current number of households in the city, and factoring in the expected shrinkage in average household size between now and 2023, this population forecast implies the number of households in the city will grow by 376,500 over the next 10 years.

If we assume that Hong Kong continues to demolish old flats at the rate of about 3,000 a year, and that there are an additional 60,000 households living in sub-standard conditions that need to be rehoused, then the total demand for new flats over the next 10 years will come to 466,500, which is pretty close to the government's 470,000 estimate.

Except for one thing: there is an enormous problem with the government's projections.

When the government says the city's population will rise by 593,000 by 2023, it doesn't expect Hongkongers to get busy making babies.

According to the official forecast, natural population growth as births exceed deaths will only result in an increase of 106,000.

The rest of the population increase - 487,000 - the government assumes will come from immigration.

That equates to an average net immigration rate of more than 48,500 a year.

Clearly the government is assuming that mainland relatives of Hong Kong residents will make full use of their annual immigration quota of 54,750, while it expects very few Hongkongers to emigrate.

But the government's assumptions look deeply flawed.

Far from attracting net immigration last year, Hong Kong actually saw a net outflow of almost 4,000 people.

Overall, over the past 10 years, net immigrants into the city have numbered on average fewer than 12,600 a year - a quarter of the number the government is projecting in the future (see the first chart).

If we assume that net immigration actually continues at the same average annual pace over the next 10 years as over the past 10, we get a very different picture of Hong Kong's population growth.

Far from increasing by 593,000 as the government predicts, the city's population will grow by just 232,000 - less than half as much (see the second chart).

This smaller number implies a slower household formation rate, with fewer than 250,000 new households needing housing.

Factor in the same demolition rate and the same rehousing programme, and Hong Kong's total demand for new homes over the next 10 years will come to about 337,000.

As Monitor argued yesterday, that's far short of the 470,000 flats the government wants to build - and certainly not nearly enough to justify building on the city's country parks.

tom.holland@scmp.com