Societal changes will continue to determine Hong Kong’s housing demand
Our long-term housing strategy should not be focused only on how many housing units to build. It must also consider the kind of society we will be encouraging through our public housing policies
In October 2013, a month after the government’s Long Term Housing Strategy (LTHS) consultation document was released, I came to the conclusion that its estimate of a net annual increase of 29,400 new households in the decade 2015-25 had significantly underestimated future housing demand growth.
Ever since then residential housing prices have continued to rise rapidly in spite of the imposition of hefty punitive stamp duties. This is strong evidence that my conclusion was correct.
The prices of small housing units are showing signs of moving up again, suggesting that underlying demand is still strong.
Housing prices in Hong Kong have escalated since the 1980s not only because of regulatory inertia that is slowing down new supply, as I argued in last week’s article, but also because we (both government and the market) have underestimated demand growth.
A commonly used measure of the gap between demand and supply of housing is the ratio of domestic households to permanent housing units, known as the “degree of sharing”. The ratio was 1.27 in 1971 and fell steadily to 0.92 in 1991. It has since remained within the range of 0.89 to 0.93 despite considerable variations in supply and demand conditions.