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  • Dec 19, 2014
  • Updated: 2:25pm
PUBLISHED : Wednesday, 11 September, 2013, 12:00am
UPDATED : Wednesday, 11 September, 2013, 5:32am

Hong Kong government immigration forecasts wildly exaggerated

With a net outflow of people through emigration, demand for new flats is far short of official projection, erasing need to build on country parks


As the writer of the South China Morning Post’s Monitor column, Tom Holland attempts each day to make sense of the latest developments in business, finance and economic affairs in Hong Kong and mainland China.

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.



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1. Some journalists should dig the facts out the origin of the family reunion policy whereby allowing 150 mainlanders settling per day in Hong Kong. I see it at first as a humanitarian policy originated by the Colonial government with consent by the Chinese government. Such policy has been in effect over two decades I believe. There is no evidence that any administration since reviewed the policy even when shortage of housing began to happen for a decade. I couldn’t help but to equate that the daily influx of migrants has been looked at favorably by local property developers for sometimes. But since the last decade with property investment scheme for permanent residency, property developers jumped on the wagon and built luxury flats for profits of few hundred times had they built for the locals including the migrants. The new taxes imposed on the investment property may not be permanent and playing safe property developers aren’t lobbying to repeal the migration policy. In essence, the migration policy has turned into a development policy that while sidetracking the call for a policy review, the property developers are just taking a break.
While I do appreciate the detailed analysis by Tom and jve, trying to project housing demand based on forecast population growth is pretty much a hopeless exercise because of the interrelationship (negative feedback) between the two. One of the main stated reasons for emigrating from HK is the high cost of housing.

Furthermore, thinking of housing supply as "units of housing" without regard to quality or size is misguided and is partly responsible for the perverse outcomes we have had.

If our government were wise they would set a target based on housing area per person (say, to match Singapore), and then supply land accordingly. Such a target more directly addresses what the population cares about and is not so sensitive to incremental population growth.
2. It will not be surprise to me that once the country parks are open for development, the scale would be wide because the parks would be filled with luxury flats just as the local developers may have dreamt of since the idea was launched a decade ago. When it happens, Central government will interfere and bring a stop to it. Most importantly, an environmentally damaged place is no picnic to govern some thirty years from now.
Despite the hopeless fight against pollution, landfill, health care system, old age support, traffic congestion, our government is still tunnel visioned in immigrating, mostly unskilled, mainlanders to Hong Kong, ignoring the decline in quality and way of life of the SAR.
Is it that difficult to figure out who gets to benefit the most from all these developments?
I appreciate Mr Holland following up on this so thoroughly.

Yet, I can't go along with just cutting the immigration projections in half with as only argument that the recent trend has been more modest.

Since there is one very good reason why the net inflow in the past years has looked fairly low: mainland mothers giving birth to babies here, then taking those babies back to the mainland. Yet, thanks to the zero-quota policy for this practice, this trend has now flattened substantially. Also, as these babies grow older and ultimately reach adulthood, the expectation is that they will come back to Hong Kong.

It is all here: www.statistics.gov.hk/pub/B1120015052012XXXXB0100.pdf (pages 49-54). If Mr Holland wants to cut the projected net inflow figure (2012-2041) of 50k in the final column on page 54 in half, he will have to convincingly argue that any or all of the figures in the preceding column are fundamentally flawed.

Simply pointing at the past trend won't do. As the description on pages 50-53 outlines, there are a number of very good reasons why the pace is/will be changing. And sure, these figures are not calculated with a 100% confidence level. They may be off by 10% or even more. But that margin of error goes both ways...

For most of the past decade, our government has underestimated population growth and the housing demand, leading to the current malaise in our housing sector. It is good that this finally changing with more realistic projections.
What about the optimistic immgration rate is a plan by the mainland government? They might be planning to flood Hong Kong with enough "patriot" voters before a free election of our chief executive...


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