Hong Kong’s supply of new homes on track for record in coming years

Official forecasts are for 86,000 unsold homes to be delivered onto the market in next four years

PUBLISHED : Friday, 30 October, 2015, 6:24pm
UPDATED : Friday, 30 October, 2015, 9:46pm

The city’s supply of private homes is projected to reach a combined 86,000 flats in the coming three to four years as the government accelerates land sales, according to government data.

Analysts said the supply trend, which represents a record in private homebuilding, would likely put house prices under pressure as buyer demand slowly catches up.

“We saw positive buying results when developers launched new developments for sale in the past few months. But sentiment will turn around quickly if the city’s economy is proven to slow,” said Wong Leung-sing, head of research at Centaline Property Agency.

The Transport and Housing Bureau announced the official figures in a report on new private housing supply for the third quarter of the year. The new estimate represents an upward revision of 3,000 units from the bureau’s previous quarterly report.

Meanwhile, presales agreement during July to September reached 10,000 units as developers rushed to put new properties on the market. This was up from 9,000 units in the previous quarter.

New mortgage loans in September totalled $20.3 billion, a drop of 13.4 per cent compared with August, Hong Kong Monetary Authority data showed.

“Buying demand is not bad this year,” said Wong. However, he added that the market would likely see home prices under pressure next year.

“If the number of units sold by presale dropped for three consecutive months, it indicates that Hong Kong is heading to a bear market,” Wong said.

The latest Centa-City Leading Index, a housing price index compiled by Centaline, showed prices easing slightly from the prior week. The index eased 0.10 per cent from the prior week to 142.98 as of October 25, dropping 0.94 per cent from the prior week. Since the start of the year, the index is up 9 per cent.

Hong Kong trails London as the city most at risk of a property bubble, according to the latest report by investment bank UBS released on Wednesday. The bank cited data showing that prices have risen 200 per cent since 2003. UBS forecasts home prices in Hong Kong to decline by more than 10 per cent by the end of 2017. Earlier this month, investment bank CLSA forecast prices will fall 17 per cent over the next 27 months.

Derek Chan, head of research at Ricacorp Properties, also expects property prices to ease in the next few years as supply continues to rise.

“Prices will gradually fall starting next year,” Chan said.

Derek Chan, head of research of another property agent Ricacorp Properties also expected home prices will face downward pressure in the next few years as supply continues to rise. “Prices will gradually fall starting next year,” said Chan.

The housing bureau’s projection of 86,000 homes includes 65,000 units under construction but excludes those presold by developers.

Meanwhile, the number of flats under construction in the first three quarters of the year totalled 7,900, down 49.7 per cent when compared with the whole year of 2014. Private homes during the third quarter totalled 3,500 units, down 40.6 per cent from the previous quarter.

The New Territories will see a marked increase in supply.

Centaline’s Wong notes a supply overhang appears to be looming for Yuen Long with only 134 presale agreements completed while 5931 unites are slated to be sold in completed next year.