Hong Kong property

New flat construction in Hong Kong slumps in first nine months, but prices seen remaining steady

Housing starts are less than half of the 25,500 units built in 2016, but analysts said that with the government planning to release more land, prices will not rise abruptly

PUBLISHED : Friday, 27 October, 2017, 12:52pm
UPDATED : Friday, 27 October, 2017, 10:16pm

The number of private flats on which construction began in Hong Kong in the third quarter of this year fell sharply, according to the latest government data, but analysts said this was unlikely to lead to a big rise in prices.

Construction starts in residential developments plunged nearly 87 per cent to 800 units in the three months ended September 30, from 6,000 units in the previous quarter, the data from the Transport and Housing Bureau showed on Friday.

Housing starts in the first three quarters totalled 9,300 units, less than half of the 25,500 units for all of 2016, when construction reached its highest since 2000.

Cliff Tse, regional director of the valuation department at JLL, said unless there was a pick up in building activity, total construction was likely to fall below the government’s target of 20,000 units for 2017. But he said he anticipated prices remaining stable.

“It may give a false signal to the market that a shortage of new supply along the pipeline will persist,” he said, “ Of course, price performance will also depend on other factors such as interest rate movements in 2018.”

The decline in new construction comes after Hong Kong home prices rose 10.3 per cent in the first eight months of this year, according to the Rating and Valuation Department.

The government has recently projected that Hong Kong’s supply of new private flats would reach 97,000 over the next three to four years, 1,000 units short of the 98,000 projection it made in the second quarter.

Thomas Lam, senior director at Knight Frank, expected that the decline in the number of new flats would not have a big impact on the residential market, given the government’s indication of its determination to increase the supply of land.

He forecast that home prices would remain stable in the next few months, with an 11 to 13 per cent increase for 2017.

Housing bureau figures showed that construction of 31,000 units on land that was sold during government land sales could start anytime.

A cumulative total of 57,000 units in Hong Kong are currently under construction, while another 9,000 units in completed projects remained unsold.

Separately, the Lands Department has received 10 bids for a government tender for a site designated for hotel development in Cheung Sha Wan by the closing deadline on Friday noon.

Surveyors are projecting the site will yield a total gross floor area of 374,000 square feet and could fetch between HK$2.17 billion (US$278.10 million) and HK$3.74 billion, or HK$5,800 to HK$10,000 per square foot.

Interested parties include Sun Hung Kai Properties, Cheung Kong Asset Holdings, Sino Land, Henderson Land Development, Regal Hotel and Far East Consortium International. Billion Development teamed up with Asia Standard International Group in submitting a bid for the tender.