Jake's ViewThe limitations of government may sell us a pup on housing

"Supply shortage lies at the heart of the prevailing housing problem … the public and private sectors on average produced only about 24,800 flats each year in the past five years. In mid-2012, the vacancy rate of private residential units was 4 per cent, the lowest in 15 years."

And at the heart of the supply shortage problem lies a question of numbers. Just how many residential units are we short of the requirement?

In the immediately previous policy address, former chief executive Donald Tsang Yam-kuen said we had 2.6 million homes for 2.35 million households, which implied an overall vacancy rate of more than 10 per cent, an indication of oversupply, not of shortage.

I have been a little uncomfortable with this estimate of our housing stock, however, as it doesn't accord well with figures from the Rating and Valuation Department, which is meant to be the authority in these matters. I now believe that one of Donald's minions may have double- counted the stock of public sale flats. It happens.

But C. Y. gave us no figure for total stock. All he said was that the private housing vacancy rate was 4 per cent, the lowest in 15 years. This doesn't say much. Over the previous 15 years, 4 per cent was the average, not the lowest figure, and the record peak in the housing slump of 2003 was only 6.8 per cent. The official figures say the private vacancy rate has always been relatively low. Likewise, when C. Y. said that the average annual production of flats over the last five years was only 24,800, he somehow forgot to mention that this was also almost exactly the rate of household formation over the period. A supply shortage can hardly grow more acute during a time when new supply matches new demand. Yet home prices doubled over this same period. A riddle.