The surge in property prices faced by the current-term Government when it took office was the result of the serious imbalance in residential housing supply and demand over the past few years.
Government-initiated land sales came to a halt in 2003. During the six years between 2004-05 and 2009-10, the Government sold 30 government sites for residential development through the Application Mechanism. Based on the estimations at the time of sale, these sites were capable of providing about 17 000 flats in total. However, during the six years between 2008 and 2013, only 9 500 private residential units were completed per annum on average.
To ensure the healthy development of the property market, as well as assist Hong Kong people in their home ownership, housing land supply is one of the top priorities of the current-term Government. However, as it takes time to search for sites and build flats, the Government has to implement both demand- and supply-side measures to tackle the property market. Since the launch of the two demand-side management measures in February last year, property prices have become stable gradually, and recently there have even been signs of property prices decreasing. However, the shortage in housing supply remains unsolved.
59 sites sold in about two years capable of providing 19 000 units
The current-term Government has made a great effort to increase land supply since it took office. Last year, the Government announced the abolition of the Application Mechanism which had been implemented for more than 10 years, and fully resumed the lead in the sale of government land. During the 26 months between April 2012 and the end of May 2014, the Government sold 59 residential sites through tender. According to estimations at the time of sale, these sites were capable of providing about 19 000 units in total. The figure does not include the railway property developments, redevelopment projects of the Urban Renewal Authority, and the development or redevelopment projects on private land. According to the forecasts of the Transport and Housing Bureau as at end May this year, about 72 000 private residential units could be provided in the market in the coming three to four years. As seen from these figures, the future housing supply would be significantly different from the situation in the past seven years, reflecting the Government’s determination to increase housing land supply.
Some members of the community are concerned whether the private housing market in Hong Kong would still be monopolised by a few major developers, thereby weakening competition in the property market. Even if the Government actively puts up land for sale, residential flats might still not be supplied to the market in time. In view of this, the Government has adopted a couple of measures. Please let me share some statistics for reference by the public.
More market participants
First, among the government sites we sold in the past two years, many were small to medium-sized sites. It is relatively easier for small-scale developers to take part in the tendering process of such sites. Among the 59 residential sites sold in the past two years, nearly half were sites with an area of about 0.5 hectares (5 000 square metres) or less. Among these 59 sites, only nine were awarded to three out of the so-called “Big Four Developers”, according to the information on the parent companies shown in the tenders received, and these nine sites are capable of producing about 3 800 units. Another 44 sites were awarded to about 30 developers on sole proprietorship or joint venture, capable of providing 12 000 units. For the remaining six sites, three were awarded to Mainland developers capable of providing about 2 100 units, while the other three to fund companies capable of providing about 400 units.
If analysed by the number of sites awarded, two developers were each awarded seven sites (including those awarded to joint ventures), one developer was awarded five sites, two consortiums were each awarded three sites, and most of the remaining developers (consisting of more than 30 companies) were only awarded one site. As can be seen, more market participants took part in the government land sales over the past two years and the market share was diversified. In addition, according to the land lease conditions, developers are required to complete the construction works within certain years after the award of tenders. We believe that, alongside the Government’s effort to increase land supply, future competition in the residential property market would be greatly enhanced. Furthermore, it is noteworthy that judging from the flat type that could be constructed on the 59 sites, most of the residential units to be provided on the sites sold in the past two years would mostly be small to medium-sized flats.
Making every effort to identify land and maintaining a steady housing land supply
We will continue to work hard to identify and develop land in order to ensure a sustainable and steady land supply, while at the same time promoting market competition and providing more small to medium-sized flats that are welcomed by the general public. We hope that the community and the locals can understand the overall situation and support our work on all fronts to increase land supply so as to tackle the problem of housing shortage in Hong Kong.
29 June, 2014
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