Housing market to enter a phase of ‘relative surplus’ between 2024-2027

JLL noted that the annual average sales of new homes in Hong Kong is only 16,400.

Based on the annual average sales of new homes of 16,400 from 2002 to 2023, JLL believes that there will be a “relative surplus” in Hong Kong’s housing market between 2024-2027,

Given the expected relative supply surplus, JLL said home prices in the region will face prolonged adjustment. 

JLL explained that due to the long cycle of residential development projects, the housing supply always lags behind price fluctuations. 

“When property prices are high, commencements of construction increase, and when prices are low, commencements of construction decrease. Hence, the residential completion figure exhibits a cycle that can last around a decade,” JLL said.

“Using an annual average primary transaction of 16,400 units as a baseline, the housing supply cycle can be distinctly divided into two phases: relative surplus and relative shortage. Despite the market being affected by other external, political, and economic factors, property prices generally trended downward during relative housing surplus and trended upward during relative housing shortage,” JLL stated.

Backing this up, JLL said that when the three-year moving average (3YMA) for private residential supply stayed above the average primary transaction volume between 1997 and 2007, the overall home price index fell by 12.3%. 

“Conversely, when supply maintained below this baseline between 2008 and 2017, the index surged by nearly 200%,” JLL added.