Property Prices vs. Property Supply

Property Prices vs. Property Supply

The government announced the Land Sale Programme for the first quarter of 2018, which includes two new land plots that provide 1,600 residential units. In addition to this, another 15,600 units will be offered by developers, with the MTR and URA offering a further 2,600 units. This totals to over 24,000 units offered in 2017/2018 which is 35% more than the government’s original projection of 18,000 units – creating a new record high of residential supply. The government has promised to increase supply by selling more land plots for residential purposes.

Although land supply has significantly increased in this fiscal year, it will take another three to four years for residential units to be constructed and for them to appear on the market. It is predicted that there will only be 20,000 new development units this year, which doesn’t satisfy the current demand. Due to the abundance of funds available in Hong Kong, the impact of interest rate hikes in the United States next year on Hong Kong’s market is expected to be limited; there will only be a significant impact on the property market when the cumulative rate hike hits 1%. Therefore, it is expected that the residential property prices will keep increasing.

In fact, a number of developers have been actively increasing their land bank over the past year. One of the most active developers in Hong Kong, Sino Land, acquired several land plots worth HK$47 billion, including Kam Sheung Road MTR Station Project Phase 1, the former headquarters of CLP, Pak Shek in Ma On Shan, Wong Chuk Hang MTR Station Phase 2 and a joint venture piece of land in Cheung Sha Wan. From these proactive initiatives, it can be seen that developers are extremely confident in the future of Hong Kong's property market. 

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