Annual 10-Year Housing Supply Forecast
Annual 10-Year Housing Supply Forecast
(31 May 2022, Hong Kong) Our Hong Kong Foundation (OHKF) has released its report with exclusive annual private and public housing supply forecast, which shows that while quick fixes like rezoning will provide short-term relief, long-term supply is still shrouded in uncertainties. To resolve these systemic challenges, the new-term Government will have to deliver on its land and housing priorities set out in its policy manifesto effectively. OHKF will continue to track and analyse the land and housing supply progress, and call for a collaborative effort in the society to tackle this difficult and protracted social issue.
Private Housing Supply: Temporary respite but uncertain outlook
With the Government’s proactive rezoning efforts and increased number of private lease modifications/land exchange in recent years, average annual completions from 2022-2026 are expected to return to around 17,300 units, which is on par with the 2017-2022 figure and higher than the 10,900 units per year figure from 2007-2016. Meanwhile, various leading indicators across the private housing development cycle have also shown improvements.
Nevertheless, a supply chasm in private housing may occur before a major supply uplift from the New Development Areas (NDAs) kicks in as scheduled in the 2030s. With the Government’s revision of public/private housing ratio in the Long Term Housing Strategy (LTHS) target in 2018, spade-ready land supply for private housing has tailed off, and completions in the medium term are expected to decline. Unless the Government implements effective policies to reverse the downtrend, average annual completions between 2027-2031 are expected to fall short of the LTHS target.
Public Housing Supply: Persistent shortfall and cautious outlook
Public housing completions consistently missed the targets for the past nine years, with a cumulative shortfall of over 105,000 units. Looking forward, completions are forecast at 21,100 units per annum from 2022/23 to 2026/27 financial year, signifying a whopping 30% shortfall from LTHS target.
We remain cautious whether the Government can fulfil the “back-loaded” promise of a supply overshoot in the long run to offset near-term undersupply. Based on current progress, a total of 306,600 public housing units will be completed by 2031/32 financial year, slightly exceeding the LTHS target. However, past track record shows that there are still uncertainties. Despite public data showing the Government touting a “back-loaded” supply pattern as early as in 2015, actual completions have shown that it did not materialise as envisioned.
We need to break the vicious cycle of project delays to achieve the public housing supply target. Comparison of the Government’s previous forecasts reveals a 15% delay in public housing completions per year. Moreover, currently known delays may only be the tip of the iceberg. The Report investigates three cases undisclosed in official documents to reveal problems stemming from endless deliberations, rigid administrative deadlocks, and squandering of development opportunities. Insufficient disclosure on project progress has made public tracking and monitoring of public housing delays difficult.
Quality of Living: Stopgaps introduced but improvements awaited
Private housing unit sizes continue to fall in the short-term. The proportion of small units has rapidly grown in the last decade, and a rebound in average unit size is only expected until after 2023. Despite two relaxations of mortgage caps, as well as the announcement of minimum flat size requirement of 280 sq. ft. for private housing in late 2021, nano-flat completions are expected to continue rising in the short-term until they gradually level off in 2024-2025.
Public housing unit sizes will also remain small in the short run. Not only will nano-flats continue to plague Green Form Subsidised Home Ownership Scheme units, they will also make a debut in the Sale of Home Ownership Scheme Flats 2022. While sales of the former have been sluggish, it remains to be seen whether the Government will consider increasing the unit size of new public housing completions.
A Solid Foundation for Housing Supply is much needed
Land and housing are not mere livelihood issues, they are also critical to the future development of Hong Kong. The key to avoiding a supply chasm in private housing and averting public housing shortfalls lies in expediting the NDAs and promptly breaking the vicious cycle of project delays. It is only with the stabilisation of land supply and rebound in housing completions that average living space per capita may increase. The next five years is a critical juncture for Hong Kong to progress from stability to prosperity. We remain optimistic that Hong Kong’s land and housing challenges can be resolved, unleashing our city’s opportunities in development and reform.
“We conducted detailed assessments of land and housing supply trends in the short-, medium- and long-terms,” explains Dr Stephen Wong, Senior Vice President and Executive Director of the Public Policy Institute of OHKF. “We exposed again the seriousness and urgency of the problem, but the analyses also pointed towards clear directions for solutions, including drastically simplifying the administrative procedures, enhancing execution and co-ordination capabilities, pushing forward infrastructure-led, multi-pronged, and large-scale developments, such as the Lantau Tomorrow Vision and the Northern Metropolis. I believe as the society works together towards this common goal of creating more land and housing supply to tackle the shortage problem, we will be seeing the shining light of hope.
“The key to averting a supply chasm lies in expediting the NDAs that would provide continuous land reserves,” observes Mr Ryan Ip, Head of Land and Housing Research of OHKF. “We therefore welcome the Government’s legislative proposals in March 2022 to streamline development procedures. We hope the Government will implement these as soon as possible, and adopt the 23 detailed recommendations we have put forward earlier for all-rounded procedure streamlining, with a view to laying a solid foundation for future land and housing supply.”