RESIDENTIAL PROPERTY | Staff Reporter, Hong Kong

Private home supply for 2019 falls 39% to 15,540 units

The new supply is concentrated in Kai Tak.

The available land for new private supply in the financial year 2019/20 is down 39% to 15,540 in terms of units, which is reflective of the government’s adjustment to its targeted public/private supply allocation from 60/40 to 70/30, according to a report by UOB Kay Hian (UOBKH).

This comes as a result of the lower private supply allocation as the target was reduced to only 13,500 units per annum based on a 30% private share, the report added. However, UOBKH analyst Shaun Tan noted that in previous years when supply targets were lowered, the potential supply highlighted by the government did not decline.

“Hence, we think the drastic fall in the supply more importantly accentuates the severity of the short-term land scarcity in Hong Kong and that it is crucial for the government to expedite the development of brownfield sites and farmland in the near term to contain the housing shortage issue,” he said.

In 2018, only 13,540 units worth of new land was supplied to the private market, which was 19% or 3,500 units short of the government’s targeted 18,000 units, the report revealed. “This would also represent the first time in five years the government had failed to meet the private unit target supply as set out in the Long Term Housing Supply Plan (LTHSP),” Tan highlighted.

Nevertheless, Hong Kong’s secretary for development Michael Wong announced during the first week of March the Government's 2019-20 Land Sales Programme, which comprises of 15 residential sites, providing around 8,850 flats and seven commercial/hotel sites.

Also read: Hong Kong unveils 2019 Land Sales Programme

According to Tan, the new supply will be concentrated in Kai Tak which may benefit existing landowners in the area.

“Of the 22 sites earmarked for tender sales in 2019/20, eight are in the Kai Tak area, of which five are commercial sites. This could garner a rerating of projects in the area which currently lacks commercial sites when the new sites are being tendered by the government, benefitting owners of existing Kai Tak projects acquired in recent years, namely SHKP, Henderson, Wheelock and Nan Fung,” he explained.

Meanwhile, the report noted that a massive commercial site at West Kowloon Terminal is expected to be tendered in H1 2019, following the government’s plan to sell the commercial plot at the Hong Kong terminal of the Guangzhou-Shenzhen-Hong Kong Express Rail Link in the first half of 2019/20.

The completed commercial project will reportedly replace ICC as the largest in that area with a gross floor area (GFA) of 3.1 msf which is 12% more than ICC’s 2.8 msf.

“The market currently estimates the price of this property to be between $20,000-35,000psf, or $63b-111b,” Tan highlighted. “The high premium could be attributable to the project’s proximity to the terminal, which renders it an extremely attractive location. We would watch out for the tender as it could drive positive sentiment in the property sector in a similar way during the sale of the Murray Road car park in 2017. Most developers have expressed interest in bidding for the rare prime site, but given the high expected price tag, developers are likely to form consortiums to bid in order to have a chance of acquiring the site.” 

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