Overcoming housing supply hurdles by unleashing Northern Metropolis land
Overcoming housing supply hurdles by unleashing Northern Metropolis land
After a turbulent year marked by disruptions and uncertainties, Hong Kong has finally stepped out of the shadows of the COVID-19 pandemic. In another positive omen, the new-term government made land and housing its top priority, and has proactively introduced new policy measures and corresponding key performance indicators (KPI).
Against this backdrop, we anticipate an improvement in housing supply in the next five years. Nevertheless, to ensure achieving the 10-year target in the Long Term Housing Strategy (LTHS), the special administrative region government should seize the opportunity to release the untapped development potential of the Northern Metropolis.
On the premise of the timely delivery of an extra 30,000 Light Public Housing (LPH) units, the total public housing completions per year for the five-year period from 2023-24 to 2027-28 would increase to 31,700 units, thus achieving the LTHS annual target. The composite waiting time for subsidized rental housing is likely to be shortened from its peak at 6.1 years in 2021-22 to 4.6 years by 2026-27, which is close to achieving the government’s KPI. Therefore, the LPH will be instrumental in supplementing short-term public housing supply.
As a break from the past, uncertainties surrounding the government’s pledge on the “back-loaded” public housing supply have been reduced and the 10-year target is within range. Firstly, information transparency has improved as the government first announced last year the detailed breakdown of public housing sites estimated to be completed in the second five-year period (2028-29 to 2032-33). Moreover, in anticipation that measures enhancing construction efficiency set out in the Policy Address would reduce recurrent delays, we expect approximately 360,000 units to be completed in the next 10 years (2023-34 to 2032-33). Apart from meeting all potential housing supply stated in the Policy Address, this will exceed the LTHS target by 20 percent.
Nevertheless, this is not without its challenges. Risks from rezoning need to be removed in anticipation of the Northern Metropolis emerging as the supply powerhouse. Not only does it make up 60 percent of the anticipated supply in the second five-year period, but half of this 60 percent belongs to scattered rezoning lands such as urban squatters and brownfield clusters. Given that there are existing occupants on these lands, complexities are expected with more time potentially needed for land resumption and clearance procedures. Therefore, we recommend that the government formulate targeted compensation and resettlement strategies in advance to mitigate any risks of delay.
Assuming the successful implementation of favorable policy measures such as streamlining development procedures, we expect the annual completion of private housing units will reach around 19,000 units in the next five years (2023-2027). This is an upward revision against our previous five-year rolling estimate. Positive trends on leading indicators such as pre-sale consent applications and building construction also offered validation to our estimation.
However, after the revision of the public-private ratio in the LTHS housing supply target from 60:40 to 70:30 in 2018, the supply of spade-ready land for private housing nosedived and has yet to be reversed. This foreshadowed the slump in completion level five years from now, which we estimate to be 13,900 units from 2028 to 2032 based on currently known projects, translating into a 30 percent drop when compared to the 19,000-unit level from 2023 to 2027.
To turn this around, unleashing the development potential in the Northern Metropolis is critical. In addition to currently known projects, many private development projects in the Northern Metropolis are undergoing planning applications. However, because of the legacy of the previous “laissez-faire” planning approach for the New Territories, many of the necessary infrastructure facilities are still underdeveloped. Before we can unlock such potential developable areas, doing so inevitably requires addressing major planning considerations, including traffic, sewage, conservation and NIMBY (not-in-my-backyard) facilities. These issues stand out as a long lead time is needed to form a consensus and resolve such challenges.
As indicated in our latest exclusive public and private housing supply forecast, while the housing supply outlook has improved, we should beware of resting on our laurels. There are still inadequately-housed households waiting for public housing, and the homeownership aspirations of the sandwich-class and young families are yet to be met. To ensure that the public and private housing supply targets are met in the next decade, the key lies in expediting the development of the Northern Metropolis, enhancing the efficiency of land delivery, and increasing the reserve of spade-ready land. If the government remains steadfast in policy implementation, there is light at the end of the tunnel for Hong Kong’s land and housing supply, which will provide solid foundations to make Hong Kong a more livable city in the future.
After a turbulent year marked by disruptions and uncertainties, Hong Kong has finally stepped out of the shadows of the COVID-19 pandemic. In another positive omen, the new-term government made land and housing its top priority, and has proactively introduced new policy measures and corresponding key performance indicators (KPI).
Against this backdrop, we anticipate an improvement in housing supply in the next five years. Nevertheless, to ensure achieving the 10-year target in the Long Term Housing Strategy (LTHS), the special administrative region government should seize the opportunity to release the untapped development potential of the Northern Metropolis.
On the premise of the timely delivery of an extra 30,000 Light Public Housing (LPH) units, the total public housing completions per year for the five-year period from 2023-24 to 2027-28 would increase to 31,700 units, thus achieving the LTHS annual target. The composite waiting time for subsidized rental housing is likely to be shortened from its peak at 6.1 years in 2021-22 to 4.6 years by 2026-27, which is close to achieving the government’s KPI. Therefore, the LPH will be instrumental in supplementing short-term public housing supply.
As a break from the past, uncertainties surrounding the government’s pledge on the “back-loaded” public housing supply have been reduced and the 10-year target is within range. Firstly, information transparency has improved as the government first announced last year the detailed breakdown of public housing sites estimated to be completed in the second five-year period (2028-29 to 2032-33). Moreover, in anticipation that measures enhancing construction efficiency set out in the Policy Address would reduce recurrent delays, we expect approximately 360,000 units to be completed in the next 10 years (2023-34 to 2032-33). Apart from meeting all potential housing supply stated in the Policy Address, this will exceed the LTHS target by 20 percent.
Nevertheless, this is not without its challenges. Risks from rezoning need to be removed in anticipation of the Northern Metropolis emerging as the supply powerhouse. Not only does it make up 60 percent of the anticipated supply in the second five-year period, but half of this 60 percent belongs to scattered rezoning lands such as urban squatters and brownfield clusters. Given that there are existing occupants on these lands, complexities are expected with more time potentially needed for land resumption and clearance procedures. Therefore, we recommend that the government formulate targeted compensation and resettlement strategies in advance to mitigate any risks of delay.
Assuming the successful implementation of favorable policy measures such as streamlining development procedures, we expect the annual completion of private housing units will reach around 19,000 units in the next five years (2023-2027). This is an upward revision against our previous five-year rolling estimate. Positive trends on leading indicators such as pre-sale consent applications and building construction also offered validation to our estimation.
However, after the revision of the public-private ratio in the LTHS housing supply target from 60:40 to 70:30 in 2018, the supply of spade-ready land for private housing nosedived and has yet to be reversed. This foreshadowed the slump in completion level five years from now, which we estimate to be 13,900 units from 2028 to 2032 based on currently known projects, translating into a 30 percent drop when compared to the 19,000-unit level from 2023 to 2027.
To turn this around, unleashing the development potential in the Northern Metropolis is critical. In addition to currently known projects, many private development projects in the Northern Metropolis are undergoing planning applications. However, because of the legacy of the previous “laissez-faire” planning approach for the New Territories, many of the necessary infrastructure facilities are still underdeveloped. Before we can unlock such potential developable areas, doing so inevitably requires addressing major planning considerations, including traffic, sewage, conservation and NIMBY (not-in-my-backyard) facilities. These issues stand out as a long lead time is needed to form a consensus and resolve such challenges.
As indicated in our latest exclusive public and private housing supply forecast, while the housing supply outlook has improved, we should beware of resting on our laurels. There are still inadequately-housed households waiting for public housing, and the homeownership aspirations of the sandwich-class and young families are yet to be met. To ensure that the public and private housing supply targets are met in the next decade, the key lies in expediting the development of the Northern Metropolis, enhancing the efficiency of land delivery, and increasing the reserve of spade-ready land. If the government remains steadfast in policy implementation, there is light at the end of the tunnel for Hong Kong’s land and housing supply, which will provide solid foundations to make Hong Kong a more livable city in the future.
