Hong Kong’s supply of new homes hits record high amid buyer reluctance
- A government estimate of Hong Kong’s supply of new private homes has increased to 107,000 units, the highest level since the forecast started in 2004
- Analysts said the estimate is not likely to equate to actual home completions as developers delay launches and slow construction to weather the downturn
A government estimate of Hong Kong’s supply of new private homes has increased to a record high of 107,000 units as buyers remain hesitant amid high interest rates.
The number of first-hand private residential units that may be available in the next three to four years increased by 2,000 as of the end of September, compared with an estimate of 105,000 issued at the end of June, the Housing Bureau said on Monday.
The potential supply has increased by 12,000 units year on year as the economic climate and the high cost of borrowing have deterred buyers. The total of 107,000 matches the estimate at the end of the first quarter, which was the highest level since the forecast began in 2004, said Buggle Lau Ka-fai, chief strategist at Midland Realty.
In the third quarter, developers completed 2,500 units, 3.1 times the total in the second quarter, bringing the tally for the first nine months to 10,100 units.
However, analysts stressed that the government’s estimate merely indicates potential supply over the next few years.
“Although the potential supply increased, it may not be converted into actual completion in the near future, as the market widely recognises that the property market has entered into a downward cycle,” said Ryan Ip Man-ki, vice-president of Our Hong Kong Foundation, a local think tank.
Sensible compromise on stamp duties right path for Hong Kong property market
The total of 10,100 units completed in the first three quarters of 2023 is less than half of the full-year forecast of 19,953 units issued in April by the Rating and Valuation Department. This indicates that developers have slowed the pace of residential construction, Lau said.
Developers started construction on about 3,200 private residential units in the third quarter, 88 per cent less than in the second quarter, according to the Housing Bureau. Construction commenced on a total of 11,500 units in the first nine months.
“The number of units commencing construction shows the willingness of the developers to invest in building despite uncertainty ahead,” said Alex Leung, senior director at CHFT Advisory and Appraisal.
Hong Kong property slump to ‘bottom out’, stamp duty cuts will help: experts
Completed projects had a total of 18,300 unsold units as of the end of September, while uncompleted projects had another 68,000 units waiting to be offered for sale, the Housing Bureau’s statistics showed.
The coming supply of private flats could meet demand in the coming few years if market sentiment remains weak, Leung said. Residential prices are expected to fall despite the reduction of stamp duties announced in the policy address, he added.
Analysts expect the effect of the stamp duty relaxations will take some time to reflect in the data, and figures for the next two quarters will be crucial in assessing the actual impact of the relaxation and the need for further adjustments.
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The ‘hits’ and ‘misses’ of John Lee’s 2023 policy address
The government’s relaxation of the property curbs, which Lee announced in his second policy address on October 25, is the first such move in a decade.
The buyers’ stamp duty will be halved to 7.5 per cent from 15 per cent for non-permanent residents and residents buying a second or additional home. In addition, the special stamp duty of 10 per cent will be waived for homeowners who resell their property after two years, from the previous three-year requirement. Eligible overseas talent are also not required to pay stamp duty on property purchases unless they fail to become permanent residents.
