Hong Kong likely to miss its official home supply target this year

The Hong Kong government is likely to miss its annual home supply target this year as completion of new flats in the third quarter plunged 41 per cent compared with the second quarter.

But analysts said supply is on track to pick up the pace again starting in 2017, after new home starts in the first three quarters of this year hit the highest level since 2000.

Completion of new flats fell to 3,300 units during the July to September period, bringing the total in the first three quarters to 10,700 units, according to the city’s Transport and Housing Bureau.

Newly built homes in the first quarter stood at 1,800 units but jumped sharply to 5,600 units in the second quarter, the official data released on Friday showed.

In a move to regulate the housing market, the government has pledged to increase land supply so as to produce 20,000 new units per year.

“Taking into account the sharp decline in new homes in the third quarter, it is unlikely that the annual completion will jump to an average at the 20,000 level,” said Cliff Tse, regional director of valuation advisory services at international property consultant JLL.

Hong Kong-based property agent Midland Realty predicted that annual completion this year will be around 17,000 units. The government’s Rating and Valuation Department earlier estimated a supply of 18,203 units this year.

The Transport and Housing Bureau on Friday said the potential supply of new flats in Hong Kong is expected to hit 93,000 over the next three to four years.

That’s equivalent to an average 23,000 new flats per year, higher than the annual take-up of about 20,000 units in the past two years.

Analysts said new supply will see an increase starting next year as there were 19,100 units under construction in the first nine months of this year. Those units, that would be completed in the next two to three years, represented an increase of 34.5 per cent when compared with the previous year.

“Construction work of 19,100 flats started in the third quarter this year, the highest level since 2000,” said Buggle Lau Kar-fai, chief analyst at Midland Realty.

The housing supply would be on track to reach the projected 93,000 units in three to four years’ time, said Lau.

He said the government was determined to increase home supply through land sales. It has announced a programme of land sales in the third quarter that could produce 4,830 new flats.

Despite a projected increase in new flat supply, home prices in the city continued to rise. According to the latest information from the Rating and Valuation Department, Hong Kong’s private domestic price index rose for a fifth straight month in August to 287.4 points, the highest since November 2015. On a monthly basis, it advanced about 1.9 per cent.

A private study by Hong Kong-based Centaline Property Agency showed that home prices were just 2 per cent lower than their last peaks in September 2015. Its Centa-City Leading Index, which tracks secondary home prices in 100 estates, showed prices gained 1.8 per cent week-on-week to 144.09 for the week ending October 23.