Hong Kong housing starts fall by one third in 2017, but no supply shortage seen
Analysts say properties released in the past few years and inventory held by developers would fill any gap
The number of private flats on which construction began in Hong Kong last year fell one third from 2016, according to the latest government data, but analysts said the city was not facing a sharp decline in supply as properties released in the past few years and inventory held by developers would fill any gap.
Construction starts in residential developments dropped 33.3 per cent to 17,000 units last year from 25,500 units in 2016, the data from the Transport and Housing Bureau showed on Friday.
Housing starts fell to 800 units in the third quarter, down from 6,000 from the previous quarter, but bounced back to 7,700 units in the fourth quarter.
“Despite a drop in private residential units commencing construction in 2017, the annual average total supply for the last five years (2013-2017) is still 51 per cent higher than for the years 2007 to 2012,” said Ingrid Cheh, associate director of Research Department at JLL.
“Assuming a gradual roll-out of flats, the supply pipeline is still expected to be higher, with an average of about 20,000 units per year available in the next five years,” she said.
“With the market focus still largely on the primary sales market, we expect the inventory held by developers to be absorbed given still-strong buying sentiment, albeit at a more gradual pace,” she added.
The figures showed that there were 9,000 unsold private housing units last year.
The bureau projected that Hong Kong’s supply of new private flats would reach 97,000 over the next three to four years.
Thomas Lam, senior director at Knight Frank, said developers would be aggressively launching new flats onto the market, taking advantage of rising home prices.
Hong Kong’s home price index climbed to 347 in November, up 1.1 per cent month on month, according to Rating and Valuation Department figures released in December. It has risen for 20 consecutive months.
The city was recently named the least affordable housing market for the eighth straight year in a study by Demographia, an urban planning policy consultancy, with the median price of a home 19.4 times the median annual pre-tax household income, up from 18.1 times a year ago.
Lam said the market outlook in the next six months would be determined by the government’s housing policy.
“ As prices have risen to such high levels, any negative factor could trigger a plunge in the capital values,” he said.