New development areas crucial to easing land shortage

May 28, 2021 06:00
Photo: Reuters

The persistent shortage of land for private housing means new development areas are the main hope to boost supply in future.

The nightmare of Hong Kong residents who are not property owners simply will not go away. Even after challenges including the anti-government protests in 2019 and the biggest health crisis for a century pushed the city into political instability and recessions, property prices are still standing firm. The Centa-City Leading Index recently climbed to over 180 points, which is within touching distance of its historical peak of 188 points in 2019. The fact is that bad news is not enough to force home prices to fall. Though many people may attribute this to strong user-based demand, the serious shortage of supply is a major cause.

Impossible to bake bread without flour

According to the report “Decisive Moment – Can Hong Kong Save Itself from the Land and Housing Supply Crisis” recently released by Our Hong Kong Foundation, the city is facing a dire situation of three “lows”, including low supply of spade-ready land, low level of completed new housing, and low quality of living. Like the analogy “you cannot bake bread without flour”, the shortage of land inevitably leads to inadequate housing supply. As a result, flats in Hong Kong are getting smaller and more expensive.

Because Hong Kong has long lacked a long-term plan for land development, spade-ready land with the adequate infrastructure for development are precious and only a limited supply of land is available to build private housing. The report expects the supply of private housing in 2020/21 to be only 13,020 units, which is only roughly half of the 25,550 units in 2017/18 during the peak supply period of spade-ready land.

What is worse is that not only is land supply pitiful, the area of land being sold by the government is also too small. If we look at the so-called “mosquito-sized” sites that can only build less than 100 units, there were 10 percent of those in 2015/16, but the proportion surged to 40 per cent in 2021/22, the highest proportion in nine years. In the land sales plan this year, there are mosquito-sized sites in industrialised districts that can only build 90 units, and even a small site on slope that can only build 50 units. Larger sites that can build more than 500 units make up less than 20 per cent of the land to be developed.

The completion of private housing is also unsatisfactory. Over the next five years (2021-2025), the forecast average annual supply is 15,000 units, which is 28 per cent less than the actual number of completed units at 20,900 in 2020. Looking further ahead to 2026-2030, we forecast the annual supply will be only 12,000 private residential units, which is 20 percent less than the figure during 2021-2025, and is also below the Long Term Housing Strategy (LTHS) target of 12,900 units.

Need to speed up progress on new development areas

If the city is to meet the private housing completion target by the LTHS, the government will need to speed up the completion of development areas and railway projects by one year, while hoping the supply of private housing will increase by 5 per cent from the current year. Our team has calculated there is a private housing shortage of some 20,500 units over the past eight years when comparing with the housing demand forecast of the Long Term Housing strategy, which is equivalent to the size of 1.6 times of Tai Koo Shing.

Looking ahead, the supply of residential land in Hong Kong comes from three main development areas, including the Tung Chung East New Town Extension on Lantau Island, Kwu Tung North and Fanling North in Northern New Territories, as well as Hung Shui Kiu in Northwest New Territories. The government should review the complicated procedures and reduce the bureaucracy to speed up the process of delivering land for private housing. Only with the timely supply of land can we build an adequate supply of flats, so that people can have homes where they can settle down, which is most Hong Kong people’s aspiration.

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Managing Editor at Our Hong Kong Foundation.