Residential Real Estate News
Hong Kong New Residential Construction Completions to Implode 44 Percent by 2026
Every stage in the residential development lifecycle shows signs of a significant slowdown
Based on JLL's latest Hong Kong Residential Market Monitor Report, JLL forecasts annual private housing completion in 2026-2028 to decrease 44% compared to 2023-2025.
Figures from the government show there has been a significant reduction in domestic units commencing construction, dropping from 21,495 units in 2020 to 12,254 units in 2022. The figure from the first nine months of 2023 shows a slight increase to 13,378 units, yet it is still far from the rebound expected after delays in some projects last year due to the pandemic. Comparing the last five years (2019 - Sep 2023) with the preceding five (2014-2018), the firm observes a deficit of 13,705 units, which implies fewer completions in the years to come.
JLL's data indicates that the Gross Floor Area (GFA) of new private residential building plans approved in the first nine months of 2023 represents a mere 55% of that in 2022, and only 49% of the annual average from 2019 to 2022. Typically, projects that obtain building plan approval will commence construction after one to two years. The decrease in GFA from building plans approved could imply fewer residential units commencing construction.
Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong said, "As government land sale contributions wane, the number of new private residential units projected to be yielded from government land sales in the first three quarters of the fiscal year 2023/2024 is a mere 1,775. This figure is substantially below the preceding decade's average, amounting to less than one-quarter of the norm."
Redevelopment of old districts is another major source of new housing supply, particularly in urban districts. It accounted for more than half of estimated units from private housing supply in the financial year of 2022/23. However, there has been a downturn in the number of compulsory sale applications, with 22 in 2022, falling from an average of 29 per year over the three years prior. As of September 2023, the Land Tribunal has received only four such applications, indicating a continued moderation trend.
Cathie Chung, Senior Director of Research at JLL in Hong Kong also commented, "The sustained decrease in homebuyer interest, compounded by financing pressure for developers under the high interest rate environment, has had a tangible effect on property development. This slowdown is noticeable at every stage of the residential development lifecycle, from land sales to the commencement of construction, and is anticipated to persist, given the dim home price outlook. We believe more demand-side supportive measures are necessary to bring the housing supply mechanism back on track."
