Hong Kong home completions rise with land supply

Prices are expected to decline 10pc in HK this year as the number of private flats to be built heads for a nine-year high, led by the rural areas

PUBLISHED : Saturday, 05 April, 2014, 1:08am
UPDATED : Tuesday, 08 April, 2014, 6:45pm

The number of private flats to be built in Hong Kong this year is expected to climb to a nine-year high after the steady increase of land supply by the government in past years.

Figures from the Rating and Valuation Department's annual publication, Hong Kong Property Review 2014, showed 17,610 flats would be completed this year, 113 per cent more than in 2013 and the highest since 2005.

However, private homes scheduled for completion next year will drop 28 per cent to 12,660.

"The increase in completed flats does affect property prices. But the main factor affecting property prices is how many of these new flats will be released for sale in the market. You can see that the developers did not release a large number of flats for sale in the first quarter amid weak housing demand," said Thomas Lam, head of research at property consultant Knight Frank.

"Unless there is an economic downturn or interest rates increase sharply, forcing developers to release a large amount of flats for sale and cut asking prices to levels below the going rates for second-hand flats, prices would only fall gradually."

The department said property prices continued to rise in the first eight months of last year but started to ease in the fourth quarter, when they grew 9 per cent, compared with the year before.

The residential rental index climbed 4 per cent during the period, the publication said.

Lam said he expected property prices to drop 10 per cent this year. Flats in suburban areas with more new supply would experience a 15 per cent decline in prices, he said.

Nearly 61 per cent of the flats completed this year will be in the New Territories, led by Tsuen Wan, Tseung Kwan O and Yuen Long.

"Developers will prefer to release the flats in the New Territories and accept a lower price. But in prime locations such as Hong Kong Island, they won't cut prices and would prefer to sit on the inventory," Lam said.

Meanwhile, completed office space this year is expected to increase to 148,000 square metres from 123,000 last year. Completion will double to 277,000 square metres in 2015.

Grade A office space completion this year is estimated at about 115,000 square metres, all in non-core commercial districts. About 63 per cent of the new supply will come from Kwun Tong and Sha Tin.

Office vacancy rate climbed to 7 per cent last year from 6 per cent in 2012 due to a "negative take-up" of 17,000 square metres.

Negative take-up refers to the surrender of office space for factors including termination of rental contracts, relocation, downsizing and bankruptcy of the tenant.

The tender for two residential sites in Shau Kei Wan and Tai Wai received 10 and eight bids, respectively, yesterday. A commercial plot in Cheung Sha Wan got 12 bidders.

Surveyors estimated the three sites were worth a total of HK$1.05 billion to HK$1.6 billion.

"The response has been good. Hong Kong Island lacks land supply and the Shau Kei Wan site has sea view and involves a small investment. That's why it attracted many medium-sized and small developers," said Alvin Lam, a director at Midland Surveyors.