2014年8月22日星期五

20140822 HK residential supply outlook: Tseung Kwan O, Tai Po, Yuen Long hardest hit



HK residential supply outlook: Tseung Kwan O, Tai Po, Yuen Long hardest hit


The newly published Hong Kong Property Review 2014 provides new data evaluating the future residential supply by district. The author takes this opportunity to analyse the information and highlight favoured and disadvantaged districts for the benefit of potential buyers.

Generally, districts with abundant supply will see purchasing power diluted by the new completions, thereby weakening the momentum of home price increases. The author adopts two measures in his analysis: 1) the ratio of new completions to current stock to measure degree of such supply abundance, and 2) the ratio of theoretical rise in vacancy rate (due to new supply) to starting vacancy rate. These two metrics help evaluate the relative strength of the new supply, and then ranked the districts according to these two indicators. The result is tabulated below:

Table 1: Future supply and theoretical vacancy rates – Buy blue areas and avoid red ones


Eastern, Southern and Kwai Tsing are the low supply districts for 2014-15
The R&V Department’s forecast completions suggest that Eastern, Southern, and Kwai Tsing will be the least supplied districts: these districts have the lowest “rise vacancy rate” and “ratio of rise in vacancy to starting vacancy” by the end of 2015, indicating they are the districts least affected by new supply (blue shades in Table 1). This will no doubt be supportive for home prices in these 3 districts. Looking at price performance, major housing estates in these districts saw prices rise by 4% YTD, and are expected to further outperform (Chart 1).

Chart 1: Trend of Centa-City Index of best 3 regions, worst 3 regions and the overall index


Vulnerable districts: Tseung Kwan O, Yuen Long, Tai Po
Tseung Kwan O (falls in Sai Kung District), Yuen Long and Tai Po look to be the most vulnerable districts (red shades in Table 1). These three districts are also plagued by supply over the past three years too, with a host of developer projects coming to the market, including Providence Bay, Mont Vert, Hemera, Tseung Kwan O zone 66 etc, which kept vacancy rates at elevated levels. Without new buying demand from other parts of Hong Kong, these three districts could see vacancy rates reaching double digits in the next two years. Year to date, home prices of leading real estates in these three districts have risen less than the low supply districts (Chart 1).

It should be pointed out that the above analysis only makes use of expected vacancy rates, while the property market is influenced by other factors, including location, presence of public housing, interest rates, government policies, etc. Vacancy is buy one of the many considerations when investing in property and buyers should base their decisions after considering all factors.

Administrative intervention caused the market failure
Since the end of 2009, government intervention in the housing market has not stopped – from restricting Loan-to-value (LTV) ratio for luxury homes through to the latest legislation on Double Stamp Duties (DSD). These measures have twisted the market’s pricing mechanism, causing prices of small/medium sized units to irrationally rally while prices of larger units languished. 

During 2006-2009, when property prices were determined by supply and demand, large units (where inventory was the lowest, and where the government should be supplying more land) saw the biggest rise in prices (Chart 2). However, the well intending bureaucrats, from 2010 to 2013, small flats where most trading up from should be taking place, witnessed the biggest rise in prices, thanks to government policies to provide easy credit to small flats buyers and the ‘HOS-for-secondary-market-white-form-buyers’ policy (Chart 3).

Chart 2: Before intervention, large units saw faster price rises than small units

Chart 3: After intervention, small units had higher price increases than large units


The road to hell is paved with good intentions – the saying seems particularly appropriate to the HK housing market. As dysfunctional anti-market policies creates ever more imbalances in the market, the future supply will inevitably be more and more detached from the real needs of the HK people.

Table 2: Home prices in leading estates before/after government intervention




Special thanks to Mr Leung Kai Hong in assisting the collection of data and charts related to this article.

沒有留言:

發佈留言