Hong Kong needs bold land-supply initiatives to underpin next growth phase into a smart city

Housing production is only expected to meet 43 per cent of the volume needed in the next 10 years to improve the living standard in the city
Provide sufficient sites for data centres and tech parks to facilitate a tech-driven economy to complement reliance on finance, property sectors

Gavin Morgan

Published: 12:01pm, 5 Oct 2021

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Sky-high office rents, and the dichotomy that US$100 million houses can coexist alongside tiny nano flats. Such is life in Hong Kong, where real estate prices make it one of the most expensive places in the world to live in and do business.

How did we get there? High business operating expenses and living costs are driven by the dire shortage of land in Hong Kong. The problem is more obvious in the housing market. To address the issue, the government announced in the 2021-22 Budget a plan for more than 18,000 private housing flats annually over the next five years.

Tempering that apparent good news is an unfortunate side effect: at least 20 per cent of this new supply will be nano flats, with a saleable area of less than 215 square feet (20 square metres).

Already, Hong Kong people, on average, have about 150 sq ft of home living space per person, half of that in Singapore. Taking into account expected population growth and the goal of raising average living space to 200 sq ft, we estimate that Hong Kong needs to build 500 million sq ft of residential area in the next 10 years, or about 750,000 of 600-sq ft units. So far, housing production is targeting only 430,000 units in this period, far below what is needed to provide a humble improvement in the living standard.

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For transparency, the government should also unveil the total residential floor area at the same time as announcing housing completion targets. It would then be easier for the public to monitor the new housing supply and improve the living environment as a result.

Further, it is imperative that the government follows through on policy initiatives to create new land and repurpose farmland and brownfield sites for forward-looking uses.

Hong Kong is not only lacking land for residential development, but also commercial sites. A decision made this year to rezone five commercial sites to residential use followed an earlier conversion of commercial sites in Science Park for residential use.

While this may help to ease the immediate housing shortage, the government should have the vision to plan for the longer-term future and balance the development of both residential and commercial properties. This includes providing sufficient sites for data centre and tech park development to speed up and facilitate Hong Kong’s evolution into an innovation and tech-driven economy, and not rely solely on finance and property sectors.

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For its part, the private sector should proactively engage in innovative and sustainable developments to diversify the city beyond its traditional urban centres, enhancing lifestyles with choices ranging from affordable housing to co-living, experience-based retail, and modern-day asset types such as data centres.

Despite the overheads, we have confidence that Hong Kong remains an attractive place to live in and do business, given its simple tax structure, wide variety of lifestyle choices and unique position in the global economy.

Now is an opportune time to take a more pragmatic view of Hong Kong’s success factors, and how they will carry forward into the future. The world is experiencing arguably the most serious economic challenge in decades. As it will take time to overcome such difficulties, we should start contemplating the future landscape of Hong Kong, and look at it with a clean slate.

We must remind ourselves that multiple drivers can lead Hong Kong towards a more robust growth path in the years to come. Though these are hardly new drivers, we have more recently forgotten or become sceptical of some of Hong Kong’s unique characteristics that set it apart from other major cities globally.

As part of China, the fastest-growing major economy in the world, Hong Kong boasts an enviable economic and business agenda. We are positioned in one of the key driver seats for Greater Bay Area development.

Our fiscal viability allows Hong Kong to take care of immediate economic strains and invest in the future simultaneously, in the face of wealth gap challenges that create opportunities for businesses to tackle sustainable city living, smart CBDs and future-proof real estates that will facilitate Hong Kong’s next phase of growth into a smart city.

Finally, we are on the cusp of being able to embark on some ambitious land supply initiatives, significantly facilitating all of these drivers.

As we peel back the layers of “the Hong Kong offer”, it clearly relies on much more than just smartly using Hong Kong’s strategically placed, compact geographic footprint. Lacking natural resources, leveraging the tangible and intangible assets of Hong Kong’s people, society, government, and economic opportunities are key to the future.

It would be very hard, if not impossible, to replicate what Hong Kong has anywhere else. And equally, without ignoring inevitable challenges, it is also very hard to dismantle it.

Gavin Morgan is the managing director at JLL in Hong Kong and chief operating officer in Greater China.

This article appeared in the South China Morning Post print edition as: Bold land initiatives will prop up growth

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