Hong Kong home prices hit new high as flat supply expected to jump in next two years
Construction of new private flats hits highest level in 10 years
Hong Kong home prices rose to a record in December after nine consecutive months of gains, even after the government unveiled higher stamp duties to curb investment demand and as new home supply is expected to jump over the next two years.
The monthly price index for private homes stood at 306.8 last month, higher than the previous record of 296.2 hit in September 2016, according to data released by the Rating and Valuation Department on Friday.
December prices were up 0.06 per cent month on month, slower than the 0.78 per cent and 2.7 per cent gains recorded in November and October respectively.
The price index was unveiled as the government said construction of private flats reached the highest level in 10 years, implying the city will see a jump in new home supply over the next two years.
Construction of new flats that started in 2016 reached 25,500 units, representing an increase of 79.58 per cent year on year, compared with 14,200 units in 2015, according to the Transport and Housing Bureau.
The number of new units under construction, which will be completed in the next two years, represents the highest level since 2006, according to statistics on private housing supply in the primary market released by the bureau on Friday.
The potential supply of new flats in Hong Kong is expected to hit 94,000 over the next three to four years, according to the bureau, also hitting a record high. That is equivalent to an average of 23,500 new flats per year, higher than the annual take-up of about 20,000 units in the past two years.
The flats that began construction in 2016 represented “the highest level in 10 years and [is] on par with levels recorded in the decade between 1987 and 1997”, said Cliff Tse, regional director of valuation advisory services at JLL. “If this continues, Hong Kong’s housing demand and supply will be in balance again.”
Wong Leung-sing, head of research at Centaline Property Agency, believes home prices in Hong Kong will be stable this year, given the balanced demand-and-supply situation.
“The government will achieve its target of providing new private flats of 20,000 units annually in the next few years. The concern is whether the government can find enough sites for homes in the long run,” said Thomas Lam, head of valuation and consultancy at Knight Frank.
Lam said the city’s housing market outlook would be largely affected by the interest rate and the macroeconomic environment, as well as the government’s housing policies.
In his final policy address, Chief Executive Leung Chun-ying restated the controversial plan to develop protected country park land for housing. The government has already instructed the relevant departments to carry out a preliminary study.
The total number of private flats completed by the end of 2016 was 14,600, representing an increase of 29.2 per cent, according to the Transport and Housing Bureau.
According to the bureau, units sold by pre-sale jumped to record high of 13,000 in 2016.
Hong Kong retained its ranking as the world’s least affordable urban centre to buy a home for the seventh year running, with its apartments costing 18.1 times gross annual median income in the third quarter of 2016, according to Demographia’s study of 406 cities around the world.