Last Wednesday, I announced the land sale programme for the fourth quarter of 2015-16. The private housing land supply from government land sale and a railway property development project in that quarter is estimated to be capable of producing about 2,650 flats. Taking the first three quarters into account and combining various sources of land supply in the year, including government land sale (9,720 flats), five railway property development projects (including the Government’s West Rail property development project at Yuen Long Station) (7,440 flats), the Urban Renewal Authority’s projects (1,060 flats) as well as private development and redevelopment projects (2,070 flats as at end November 2015), it is estimated that the private housing land supply in 2015-16 has a total capacity of producing about 20,300 flats. This exceeds our target of 19,000 flats set in the beginning of 2015, and demonstrates the efforts of relevant departments and the Government’s flexible response to market changes and challenges.
In my blogs of last July and September, I shared with you some data of the private residential property market, and reminded potential home-buyers to exercise extra caution in assessing the risks involved and their affordability in flat purchases. Over the past two months or so, the residential property market has shown obvious signs of softening. According to the figures available to us, the price and rental indices of private residential properties in November 2015 dropped by 4.1 per cent and 2.1 per cent respectively as compared with the record-high figures in September 2015. As there is a one-month lag, the statistics merely reflected the market situation in October 2015. Market intelligence indicated that the property price and rent gradually decline in the subsequent two months. On the other hand, the current overall transaction volume for residential properties in Hong Kong is hovering at the record low since 1997. Only about 2,800 transactions were recorded in November 2015. The total transaction volume in the first 11 months of 2015 was 51,900, representing a decrease of 5,800 transactions compared with that over the same period in 2014, and far lower than the levels during the property market booms in 1997 (around 172,700 transactions) and 2010 (around 135,800 transactions).
The future supply of local residential units will remain at a 10-year high. Statistics in September 2015 revealed that the potential supply of first-hand flats over the next three to four years will hit 86,000, nearly 70 per cent of which will be small and medium-sized flats with a saleable area less than 70 square metres. Another 9,700 units could be provided by a batch of sites for which the procedures of land premium payment have been completed or the tender procedures will soon be completed.
This high potential supply of first-hand residential properties was hard-earned. Over the past few years, colleagues of different departments have been working hard to increase housing land supply in accordance with annual target, even in the face of difficulties. Our efforts will build public confidence in the Government’s determination to continuously and steadily supply land. With a clearer and more reliable expectation of future housing supply, the public could make more rational analysis of market situation and trend instead of making rash decisions for fear of inadequate future supply. As many academics and market practitioners have recently pointed out, the public’s expectation of the future property market is one of the important factors affecting the property price trend.
At the press conference on land sale programme last week, I made a rough assumption of the potential first-hand flat supply in the next three to four years, i.e., the 86,000 flats developers have yet to dispose of. For a small and medium-sized flat of 500 to 600 square feet costing about 5 to 6 million dollars, the consequent price difference will be up to one million dollars if the property price drops (or rises by a lesser extent) about 10 per cent due to various factors. It would be nice if potential home-buyers could spend the one million dollars on other expenditures such as children’s education, care for elderly parents, or for leisure or other useful purchases. The total sum of 86 billion dollars would bring benefits to the community as a whole if people could spend the money on purposes other than flat mortgage payment.
Though the property prices have recently softened a little, the price level is still beyond the affordability of the general public. We remain committed to increasing land supply and will not slow down our pace. In view of judicial reviews against certain sites, we will seek legal advice and handle the matters prudently. However, we would not and cannot flinch. If we had halted our work on individual sites or even overall land supply in the past simply because of opposition, hindrance or potential legal risks and as a result, could not meet the target of housing land supply, what would be the impact on future housing land supply and market expectation? Would this make the property market even harder to soften? Ultimately, who will suffer and who will benefit?
3 January, 2016
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