Government fails to reach land supply target, as only 13,850 flats to be created, official says

Hong Kong’s private housing land supply has failed to meet the government’s 2018 to 2019 target, even as the number of private homes supplied by the tenders is at a high level, according to a senior government official on Friday.

“The housing market is going through correction, but we will not slow land supply due to the home price change. We are uncertain whether it will be short-term or long-term,” said Michael Wong, the Secretary for Development.

The government will release four residential plots, two in Kai Tak, and one on Lantau Island and one in Yuen Long, providing 1,860 units in the quarter through March. Together with other sources of land, a total of 3,950 units will be developed for the quarter.

For the financial year ending March 31, land supply equivalent to 13,850 flats will be released, about 23 per cent lower than the target set earlier this year of 18,000 units.

“The supply of private flats in the city has been maintained at a rather high level,” said Wong. “It is very likely the government will assign more plots for use as private homes to public housing in the future. The more challenging part is at the public housing side where we have seen a clear shortfall.”

In June, the government announced it would reallocate nine government land sites, including three in Kai Tak and six in Anderson Road Quarry, originally earmarked for private housing to build 10,600 public flats.

Partly as a result of these changes, the total number of private homes to be developed on this year’s land supply is 43 per cent lower than 24,280 units provided in the prior financial year.

“That confirms the long-term trend in private home supply is shrinking, and will impact the sentiment of the market. Buyers, taking a wait-and-see approach will not immediately change their plan and enter the market, but will adjust their forecast of the downturn and shorten their waiting time,” said Derek Chan, research head at Ricacorp Properties.

During the past four years the government has provided land for about 20,000 flats annually, while in the coming three to four years a total of around 93,000 private homes can be expected, Wong said.

Thomas Lam, an executive director at Knight Frank, said the dwindling supply could add to asset price inflation down the road.

“I’m worried about land supply in three to four years,” Lam said. “The time left for government to find sites for private homes after 2022 is not that long, only one to two years. If there were difficulties and the economy continues to remain strong, we would see home prices pick up.”

Lam said that land prices have dropped 10 per cent as compared to that in January and will further decline by another 5 to 10 per cent in the coming 12 months.

The price for a site in Kai Tak area sold on Thursday was HK$13,523 per square foot, 12.7 per cent lower than an adjoining parcel that sold on November 14.

Hong Kong’s property market had turned for the worse since August, after Hong Kong’s Chief Executive Carrie Lam Cheng Yuet-ngor proposed a vacancy tax designed to force developers to add to the city’s housing supply, while banks began raising mortgage rates for the first time in 12 years.

Centa-City Leading Index, the home price index compiled by Centaline Property Agency, has fallen 6.4 per cent in the 12 weeks ended December 16, the longest losing streak since November 2008.

The coming quarter will also see an additional commercial site made available for tender at Kai Tak, with planned release of 863,000 square feet, or enough to build 480 to 800 hotel rooms.

Among other land tenders due in the first quarter, Kai Tak 4C Site 2, on the runway of the former Kai Tak airport site, is expected to fetch HK$12.83 billion (US$1.64 billion), or HK$20,000 per sq ft, according to Midland Surveyors. The site is expected to be the most expensive among four residential plots released in the quarter ending in March.