Hong Kong's third-quarter housing supply shrinks, foiling policymakers' attempt to improve affordability for first-time buyers

By Lam Ka-sing kasing.lam@scmp.com / https://www.scmp.com/property/hong-kong-china/article/3034518/hong-kongs-private-housing-supply-drops-third-quarter?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp | November 26, 2019 4:59 PM SGT
Hong Kong's property developers completed building homes at a slower pace during the third quarter, exacerbating the housing shortage that had made the city the world's most expensive urban centre to live in.
The number of finished private residential units fell 31.3 per cent from a year ago to 4,400 units in the three months ended September, fewer than the 4,800 units built during the preceding quarter, according to data by the Transport and Housing Bureau.
That puts the city's 2019 housing stock on track to reach a four-year low of 13,467 units, 34 per cent short of the government's target, according to a projection based on current building pace. Last year, 21,000 new homes were added to the city's supply, the highest annual rate since 2004. In the first nine months of this year, 10,100 homes were completed.
"The completion rate of private housing is unlikely to reach the annual target," said Anita Cheung, senior manager at the data and research centre of Midland Realty. "In the first three quarters, the total number of homes built was about half of the government's projected annual completion."
Chief Executive Carrie Lam Cheng Yuet-ngor meets the press at the Central Government Offices in Tamar, after the 2019 policy address speech. Photo: May Tse alt=Chief Executive Carrie Lam Cheng Yuet-ngor meets the press at the Central Government Offices in Tamar, after the 2019 policy address speech. Photo: May Tse
Housing affordability is one of the biggest challenges for Hong Kong's policymakers, as they try to unravel the economic and sociopolitical issues that have led to the outburst of public grievances that undergird the city's worst political crisis. The shortage of housing " with as many as 25 potential buyers bidding for each available flat during property launches " has caused prices to spiral upwards beyond the reach of many average first-time buyers.
"If the supply of private housing land cannot be replenished on time, the effect of the government's policy to strengthen the supply of public housing will become obvious after three years," said Ricacorp Properties' research head Derek Chan. "There could be a fault in the supply of private housing."
To make up for the shortfall, Hong Kong's Urban Renewal Authority (URA) said it would expand its redevelopment business to more than double the number of flats in its housing estates every year.
The number of completed flats from the URA's redevelopment sites may increase to 2,100 units every year in the next eight to 10 years, up from the 860 homes added every year in the past six years.
"The pace of redevelopment could be hastened," said URA chairman Chow Chung-kong. "Many of our projects in the past were led by demand from the owners and the sites were small. We can expand from that, due to the gradual successes in our district planning model."
Hong Kong's housing shortage underscores the urgency faced by Chief Executive Carrie Lam Cheng Yuet-ngor in addressing public discontent in the world's most expensive city. Affordability, job prospects and a yawning wealth gap in one of the world's most prosperous cities have combined into a combustible mix that have fuelled street protests around the city since June.
The first round of sales of the Seaside Sonata flats by CK Asset on October 17, 2019. Photo: Handout alt=The first round of sales of the Seaside Sonata flats by CK Asset on October 17, 2019. Photo: Handout
Lam eased some mortgage financing restrictions to support more ownership on October 16, prompting some developers to speed up new launches to meet demand. The loans cap for borrowers eligible for 80 per cent loan financing " from 50 per cent " was raised to HK$10 million.
"The relaxed cap ... stimulated a surge in turnover in the secondary market," pushing some transacted prices to new highs, said Wong Leung-sing, senior associate director of research at Centaline Property Agency. "After the policy address, sentiment in the housing market improved significantly. Home price may stop their declines and stabilise, and be reflected in the Centa-City Leading Index revealed in mid-November."
Eight developers will be offering more than 1,000 flats for sale next week, most of them priced at below HK$8 million (US$1 million) to make them eligible for 90 per cent loan financing, in one of the city's biggest property bonanzas.
CK Asset Holdings, China Evergrande Group, Sun Hung Kai Properties, Billion Development and Project Management, China Overseas Land & Investment, Grand Ming Group Holdings and HKR International have all sped up launches to take advantage of an improved market sentiment.
The policy tweak last week was only meant to help homebuyers with "regular income" but lacked the capacity to make a down payment, Hong Kong's Secretary for Financial Services and The Treasury James Lau said, adding that the move was not intended to arrest the property market's slump or boost home prices.
"When the housing market was relatively hot in the past, some people worried that relaxing the mortgage [restriction] would add fuel to the fire," Lau said. "But now we see the risk with the overall situation is still under control. Only those who can afford to service their mortgage payments and meet the requirements for stress test should enter the market."
The government is also working with its Hong Kong Mortgage Corporation to provide an extra 30 per cent of loans to help first-time homebuyers secure financing through the mortgage insurance programme.
Still, the supply of new private housing could fall after the next three to four years as measures to boost long-term housing supply including the land-sharing scheme introduced in Lam's policy address cannot add to the housing supply quickly enough, said Midland's Cheung.
"The government last year adjusted the public-to-private housing ratio in the next 10 years to 7:3," she said, adding that the number of private flats that can be built on new land supply has shrank by 25 per cent to 13,500 from 18,000.
The average price of used homes across Hong Kong fell 1.8 per cent between May and August, according to figures released by the Rating and Valuation Department, while the more current Centa-City Leading Index sank 2.9 per cent from September 1 to October 20.
With additional reporting by Lilian Cheng
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.
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