• Sun
  • Dec 28, 2014
  • Updated: 2:54am
PropertyHong Kong & China

Homebuyers face wait for price drop as supply target barely met

Despite a planned increase in land sales next quarter, the government is struggling to reach its target of supplying 20,000 units

PUBLISHED : Wednesday, 18 December, 2013, 11:27pm
UPDATED : Thursday, 19 December, 2013, 2:04am

Home seekers hoping to see prices fall to a reasonable level in the short term are likely to be disappointed.

That's because even though the government plans to increase land sales next quarter to provide 66 per cent more flats than this quarter, it is struggling to meet its target of supplying 20,000 homes this financial year.

This fully demonstrates the resolve to increase housing land supply

Twelve residential sites and one commercial site will be released next quarter, enabling the construction of 5,500 flats, compared with just 3,300 this quarter.

"In the next quarterly land sale programme, the government will sell the greatest number of sites and provide the highest flat production capacity since the launch of quarterly land sale programme in 2011," Secretary for Development Paul Chan Mo-po said yesterday. "This fully demonstrates the government's resolve to increase housing land supply."

Chan said the land released in the financial year ending in March would be sufficient to build 13,700 flats.

The government set a target of 20,000 flats, including land supply from railway projects being offered by the MTR Corp, including on its West Rail line.

But Vincent Cheung Kiu-cho, national director for Greater China at international property consultant Cushman & Wakefield, said he doubted whether the government could meet that target.

Railway residential projects would provide an additional 6,000 flats if the two railways released four projects for tender over the next three months.

"It is not easy for all the land to be sold within the next three months," he said.

The MTR Corp would hold back West Rail and other sites from tender sale if market sentiment turned sour, he said.

Midland Realty chief analyst Buggle Lau Ka-fai said home prices were unlikely to come under severe downward pressure.

"We will not see a big fall in prices in the short term," he said.

But Lau said the government had sent out a message that it would continue increasing land supply in the long term.

"Despite there being no significant increase in flat supply this fiscal year, it does not mean the government will miss the target next year and the year after next," he said.

With the government's cooling measures curbing price growth, Lau said home prices could fall by 5 per cent to 10 per cent in the first half of next year.

Cheung said an estimated 2,000 homes would be supplied from redevelopment projects undertaken by the Urban Renewal Authority and redevelopments on private land.

"If all land has been sold by March, the government could provide 20,100 or 20,200 units. That would be about 100 or 200 flats more than its housing target," Cheung said.


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Supply of land and residential units has long been analogous to that of flour and bread. It is easy to understand that increased supply of flour does not mean increased supply of bread because all depends on the desire of the bakers. Naturally, even with more flour in stock, bakers will control the supply of bread so that the price of bread will increase because of limited supply of bread. It is therefore always considered simple and naive for Government to use the strategy of increasing the supply of land in the hope that increasing the supply of land will eventually decrease the price of residential units by ignoring the control factor of the developers. It is only by linking the flow of funds from the sale of land to the building of public housing units will in the long run reduce the price of residential units. The simple logic can be depicted from the completion of the fund flow diagram – the more fund from more sale of land are generated, the more fund should be channelled to building more public housing units hence reducing the demand for residential units in the long run! Unfortunately, the Government has up to now worded louder than action in resolving the housing problem of Hong Kong.
Couldn't agree more. What the government should do is to attach some limitations to the land sold such as when the land MUST be turned into flats. If I remember correctly, some local governments on the mainland are doing this already.


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