Land and Housing Supply in Hong Kong
1
Land Supply Forum, Apr, 2016
Edward Yiu 姚松炎
Associate Director, IOFC 未來城市研究所副所長
Associate Professor, CUHK 中文大學副教授
10-year Ave Min Max
Household Net Increase
294,000 271,950 316,050
Re-housing 46,300
Poor Living Conditions
74,900
Others 34,500 27,000 42,000
Total 449,700 420,150 479,250
Vacant Units 20,300 19,850 20,750
Adjusted “Demand”
470,000 440,000 500,000
Long Term Housing Strategy 2013
Total Household Formation
3
20000-
30000/yr
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Housing Completion
No of Households increased
Source: RVD (2015) and CSD (2015)
Year Population No. of Households NoH Change/Yr
NoH yoy %
1991 5,752,000 1,601,900
2001 6,714,300 2,054,500 45,260 2.8%
2011 7,071,600 2,359,300 30,480 1.5%
2021* 7,662,000 2,554,000 19,470 0.8%
2031* 8,160,900 2,720,300 16,630 0.7%
2041* 8,469,000 2,823,000 10,270 0.4%
Sharp Decrease of NoH yoy
Population and Households HK
LTHS=29,400
5
Housing Price v. Fertility
http://www.devilsdictionaries.com/blog/housing-prices-and-fertility-rates
[1] Li, P. & Xu, J.(2012) Housing price and fertility rate, CEJ 5, 97.
[2] Yi,J. & Zhang, J. (2010) House Price on Fertility: Evidence From Hong Kong, EI
48, 635.
6
Housing Price v. Fertility
Source: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026127/oecd-
educational-report-pisa-fever-is-causing-east-asias-demographic-collapse/
Hong Kong 1981 2012 2041
Declining fertility rate Number of live births per woman
1.9
1.3
1.2
Total Housing Completion
7
0
10000
20000
30000
40000
50000
60000
2002-3 2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 2014 -15*
2015 -16*
2016 -17*
Total Subsidized Housing Completion
Private Housing Completion
Total Housing Supply
>40000/yr
Year Total No. of
Housing Units
YoY Change YoY Change %
1983 1,111,000
1993 1,696,000 58,500 5.3%
2003 2,332,000 63,600 3.8%
2013 2,616,000 28,400 1.2%
2021* 2,936,000 NA NA
2031* 3,336,000 40,000 1.4%
2041* 3,736,000 40,000 1.2%
Housing Completion HK
Year Total No. of Housing Units
Total No. of Households
Housing Stock – Households
1983 1,111,000 1,334,300 -223,300
1993 1,696,000 1,677,700 +18,300
2003 2,332,000 2,114,000 +218,000
2013 2,616,000 2,404,800 +211,200 (8%)
2021* 2,936,000 2,554,000 +382,000 (13%)
2031* 3,336,000 2,720,300 +615,700 (18%)
2041* 3,736,000 2,823,000 +913,000 (24%)
Supply>Demand, Now and Future
40,000 pa 10,000 pa
Housing Sold (1st Hand)
10
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
1st hand Sold Out Units (TV1)
Cumulative Sellable Units
Approved to sell Units
Demand Range from 11,000 – 25,000 units pa
Land Supply > Demand
11
http://www.wwf.org.hk/en/?14400/WWF-
rapid-response-cons-20151109#
• The demand for housing will not
continuously increase
• Both the land and housing supply are
more than adequate
• It is clear that there is no justifiable need
or reason to sacrifice our valuable
natural environment; indeed, it is more
important than ever to preserve our
natural heritage for future generations.
Birth and Death 1961 -2041
0
20,000
40,000
60,000
80,000
100,000
120,000
65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40
BIRTH DEATHSource: CSD (2015) and
http://www.statistics.gov.hk/pub/B1120015052012XXXXB0100.pdf
Forecasts
2027
Ageing and Housing Supply
• A commonly ignored source of housing
supply;
• Housing supply does not necessarily come
from new developments;
• If pass-away are home owners, their property
would be resold or transferred to other users;
• With the ageing trend, downsizing activities
would also be increasing, which can increase
housing supply.
If Insufficient
14
Insufficiency
Visitors (68,000 units)
Expatriates / Students
(10,000?)
Mobile Residents (100,000
units) Vacancy (46,000 units) & Others
Natural Pop
Growth
Rehousing Need
Investment Need
Type Est. Qty
MR 100,000
Visitors 68,000
Vacancy 46,000
Ex/S 10,000
Total 224,000
S - D 211,200
Population Related
Implications on Land Supply
15
Case Housing Units Required
Land Required (ha)
Baseline Case 35,000 pa 35 pa
Each floor area of each block = 4,000sf
@25-storey
Site area = 100,000 sf, pr = 5, sc = 20%
Total 1,000 housing units
500 sf / unit
8-unit per storey
Total 3,000 persons
5 blocks
Implication on Land Needs
16
• 2014-2017
• 35ha pa
Short Term
• 2018-2024
• 25ha pa
Medium Term
• 2025-2041
• 15ha pa
Long Term
Land Demand <> Needs
Include roads , etc.
Say 50 ha pa
17
Land Supply (May 2013) Developable Land Area (ha) Housing Units
GIC 27 11,900
GB (1st Batch – deserted) 57 23,000
I 30 20,400
URA 4.9 4,700
Railway 33 8,700
Quarry 27 15,000
Streamline Process 130 45,000
Total 309 128,700
http://www.legco.gov.hk/yr12-13/chinese/sec/library/1213in21-c.pdf
Accommodating (2013-2017) 4-year Demand
18
Land Supply (Processing) Developable Land Area (ha)
Kowloon East 35
MTR 90
Vacant Government Land (zoned for residential use)
391.5
Rezone I to R 60
Accommodating (2017-2021) 100,000
Households
19
Land Supply (Supported by the Public )
Developable Land Area (ha)
Urban Renewal 50
Brownfield 1,200
I zoned Land (Remaining) 1,400
Accommodating (2021-2041) 450,000
Households
Develop Green Belts?
Urban
Green belt
Countrypark
London’s Approach to the Green Belt
Importance of GB 1. England’s 14 GB covers nearly 13% of England,
2. Provide a breath of fresh air for 60% of the population – 30 million
people – living in the urban areas within GB boundaries
3. New surveys show that 95% of people value the beauty of the GB
4. 58% have visited for leisure in the past 12 months
Fresh Approach to the GB 1. Recognise and protect the Green Belt
2. Invest in and improve the Green Belt
3. Connect and network the Green Belt
Approach to Development • Brownfield First Policy
CPRE (2010) Green Belts: a greener future,
http://welwynhatfield.co.uk/wp-content/uploads/2012/04/green-belts-
a-greener-future-summary.pdf
London’s Greenbelts
“The overall area covered by the designated Green Belt has doubled
since 1978. In some cases this incorporates expansion of Green Belt
intended to offset the loss of areas to new development.
http://welwynhatfield.co.uk/wp-content/uploads/2012/04/green-belts-a-greener-future-summary.pdf
Planning Purposes of GB
• The main purposes of the GB zone include the following:
• To conserve existing landscape features, areas of
scenic value and areas of recognised “fung shui”
importance;
• To define the outer limits of urbanized districts and to
serve as a buffer between and within urbna areas; and
• To provide additional outlets for passive recreational
uses. (TPB PG-NO. 10)
• To primarily conserve the existing natural environment
amid the built-up areas/at the urban fringe,
• to safeguard it from encroachment by urban type
development,
• to define the limits of urban and sub-urban
development areas by natural features,
• to contain urban sprawl as well as
• to provide passive recreational outlets,
• with a general presumption against development. – Sources:
– OZPs
– S.3.5.2, Ch. 10 Conservation, Hong Kong Planning Standard and Guidelines, Aug. 2010 Edition,
HKSAR Government http://www.pland.gov.hk/pland_en/tech_doc/hkpsg/full/ch10/ch10_text.htm
Planning Intentions of GB
Various Conditions of GB
Various Conditions of GB
Appropriateness of Rezoning GB for
Residential Use
GB
- Conservation
- City Boundary
- Recreational
Uses
Residential
Use?
Rezoning
Are the original functions
of the GB sacrificed?
Principles in Rezoning GB
GB should not be rezoned unless:
1. It does not serve the required functions of a GB – devegetated, deserted or formed land;
2. The new use can better serve the required functions – upgraded to SSSI, countrypark, etc.
GB policy should be reviewed by a long term strategy of territorial planning, rather than a piecemeal approach of rezoning.
Development Bureau’s
Approach
Review Standard
Phase I Phase II
Devegetated Area > 0.5ha, Slope < 20⁰
Deserted Next to developed area
Formed Land Next to transportation means
Lower value in limiting boundary
and conservation
〈局長隨筆〉 http://www.devb.gov.hk/tc/home/my_blog/index_id_80.html
Private Applications for GB Rezoning
were mostly Rejected Application for GB Rezoning (1997-2014) – by districts
District Approved Rejected Total Rejection
Rate
HKI 3 4 7 57.14%
Wong Lai Chung 0 2 2 100.00%
North Point 0 1 1 100.00%
Pokfulam 1 0 1 0.00%
Peak 2 0 2 0.00%
Quarry Bay 0 1 1 100.00%
KLN 0 0 0 --
NT 4 26 30 86.67%
SS/Fanling 0 9 9 100.00%
Tsuen Wan 0 2 2 100.00%
Tsuen Wan W 0 4 4 100.00%
Tai Po 1 2 3 66.67%
Shatin 1 1 2 50.00%
Ma On Shan 0 1 1 100.00%
Kwun Tong S 0 2 2 100.00%
Sai Kung 0 2 2 100.00%
Lantau I S 2 0 2 0.00%
Tuen Mun 0 2 2 100.00%
Yuen Long 0 1 1 100.00%
全港 7 30 37 81.08%
30 out of 37 applications
were rejected (81%)
Rejection Reasons
15
10
11
10
10
11
1
8
5
5
19
24
1
9
10
2
0 5 10 15 20 25 30
與「綠化地帶」的規劃意向相違背
發展過度密集
影響景觀/砍樹
影響交通
影響污水/排水/基礎設施
影響環境
山泥傾瀉的風險
影響城市設計/視覺效果
影響政府、機構或社區設施
影響休憩用地的供應
資料不足
不良先例
涉及政府土地
在規劃研究完成前改劃為時過早
危害完整的土地規劃
減少為應付丁屋發展需求的土地供應
Number of Applications
否決
原因
Rejection Reasons
Violation of the planning intentions of GB
Set bad precedents
Insufficient Information
Case Study
Functions GB
Conservation Woodland, next to countrypark, important habitat
Buffer Limiting urban encroachment into countrypark
Passive
Recreation Popular hiking trail
Performing the Functions of GB
Buffer between a countrypark and the developed area
http://www2.ozp.tpb.gov.hk/gos/default.aspx
Ecological Value of GB
Limnonectes
Polypedates_megacephalus
marsh frog
Public Opinions on GB
Study Area:
Period:Mid
Jun 2014
No. of
Sample:
312
Method:
Public Opinion Survey Results
96.8%
2.9%
0.3%
A. Conservation Function
有
無
無意見 78.5%
19.9%
1.3% 0.3%
B. Limit Urban Sprawling
有
無
無意見
不一定
85.6%
13.1% 1.3%
C. Passive Recreational Function
有
無
無意見
Opinion of GB Rezoning?
22.8%
6.7%
74.0%
1.6%
Agree or Disagree with the Govt’s GB
Rezoning Application?
贊成發展作公營房屋
贊成發展作私營房屋
不贊成
無意見
會破
壞生
態
減少
綠化/
公共
休憩
空間
危害
郊野
公園
城市
會過
度擴
張/發
展
其他 沒有
列明
不贊成的原因 67.5% 72.7% 39.0% 39.0% 19.5% 1.7%
67.5% 72.7%
39.0% 39.0%
19.5%
1.7% 0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%百
分比
(%
)
不贊成的原因
Disagree
Agree to build private housing
Agree to build public housing
Opinions on Other Land Supply
市區重
建 填海
重建政
府、機
構/社區
用地
(如學
校及社
區會
堂)
發展棕
土(如
露天貨
櫃場及
停車
場)
發展岩
洞(如
搬遷沙
田污水
處理
廠)
開發鄉
郊土地
發展綠
化地帶 其他
增加土地供應以配合未來發展的方法 59.3% 12.2% 30.4% 40.1% 7.4% 18.9% 4.2% 5.4%
59.3%
12.2%
30.4%
40.1%
7.4%
18.9%
4.2% 5.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
百分
比 (
%)
UR Rec GIC BF Car Rur GB Oth
Opinions on GB Rezoning Application
91.3%
7.1% 1.6%
GB should be protected?
應該
不應該
無意見
12.8%
86.2%
1.0%
GB rezoned to private
housing?
贊成
不贊成
無意見
Should
Should not
Develop Brownfields?
41
Lau, T.L. (2015) Cost-benefit analysis of residential
development in brownfield and greenfield, FYT,
GRM, CUHK (supervised by CY Yiu)
Economic Benefits Comparison
42 Lau, T.L. (2015)
Social and Environmental
Benefits Comparison
43
Lau, T.L. (2015)
Benefits Comparisons
44 Lau, T.L. (2015)
CBR Comparison
45 Lau, T.L. (2015)
Brownfield Greenfield
Economic Cost $2,204,405,090 $1,769,460,000
Economic Benefit $7,932,049,200 $3,054,371,407
Economic CBR 1:3.60 1:1.73
Brownfield/Greenfield
Economic CBR Ratio 2.08
Total CBR Ratio 3.75
Brownfield First HK
46
• 1200 ha brownfield in HK
• Mostly are originally farmland
• But are converted into container
depots and storage sites, etc.
Why Housing is Unaffordable?
Housing Supply
Land Supply
Insufficent
Ultra Low IR
High Inflation
Real Interest
Rate
Housing Supply is NOT Correlated with Housing Completion
Bauhinia Foundation Research Centre (2014) Relationship between Proportion of
Private Housing Completions, Amount of Private Housing Completions, Property
Prices in Hong Kong, http://www.bauhinia.org/document/doc186eng.pdf
“There is no relationship between the proportion of
private housing completions and property prices in
terms of their correlation coefficient.” (Bauhinia
Foundation Research Centre, 2014)
『從相關係數而言,私人住宅落成量與樓價之間沒有任何關係。』(翻譯自智經研究中心,2014)
Housing Supply and Price
49 0
5000
10000
15000
20000
25000
30000
35000
40000
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
yoy HPI
Completions (RVD)
High, High
High, Low
Low, High
相關係數 = -0.29
Land Supply and Vacancy
50 Wang, H., Zhang, C. and Dai, W. (2013) Rental Adjustment and Housing Prices: Evidence from
Hong Kong’s Residential Property Market, HKIMR Working Paper No. 01/2013
http://www.hkimr.org/uploads/publication/346/wp-no-01_2013-final-.pdf
High, Low
Med, High
Low, Low
Land Supply is NOT a Cause
“the coefficient of land supply index is [positive], which contradicts
with the theoretical prediction that increases in land supply have a
dampening effect on house prices in the long run. On a second
thought, this may reflect an impact in the reverse directly, i.e. higher
house prices provide an incentive for developers to build up new
residential property projects” (Glindro et al., 2007)
『土地供應指標的係數為[正],驗證結果與理論預測相違背,增加土地供應從長遠而言,並未對房價起壓抑作用。退一步講,這可能反映相反的因果影響,即提高房價反而激勵開發商構建更多新的住宅物業項目。』(翻譯自Glindro et al.,2007)
Glindro, E.T., Subhanij T., Szeto, J. and Zhu, H. (2007) Are Asia-Pacific Housing
Prices Too High For Comfort?, BIS paper
http://www.bis.org/repofficepubl/arpresearch_fs_200806.06.pdf
Wheaton’s Model
Property Market:
Stock Adjustment Construction (sq. ft)
Asset Market Construction
Price $ Stock (sq. ft)
Property Market:
Rent
Determination
Rent $
P=R/i
Asset
Market:
Valuation
S=C-S P = f(C)
Price -> Supply
DiPasquale-Wheaton’s (1992) Model
Real Interest Rate Effects
• Casual Observations
1996 2001 2006 2011
HIBOR % 5.48 3.44 4.21 0.27
CPIA yoy % 6.31 -1.60 2.03 5.51
RIR -0.83 5.04 2.18 -5.24
HPI (yr end) 134.5 73.8 93.8 181.1
Asian Financial Crisis
RIR v HPI
• 相關系數-58%;
Econometric Analysis
正實質利率與負實質利率效應
實質利率效應
d(RIR) Explains d(HPI)
-2.61%
-0.83%
Yiu, C.Y. (2009) Negative real interest rate and housing bubble implosion – an
empirical study in Hong Kong, Journal of Financial Management of Property and
Construction, 14(3), 257-270
Global Financial Crisis 2007
Housing Bubble Predicted (Oct 28, 2009)
CCL in 2009 = 75;
CCL in 2015 = 144
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1434312
Yiu, C.Y. (2009/07/15) Negative Real Interest Rate and Housing Bubble Implosion - An Empirical Study in Hong Kong, SSRN
RIR Theory Prediction
Dipped into Negative Zone since Nov 2008;
Negative Today– 2%
It Explains Many Bubbles
• Japan’s Lost Decade 1980s • HK Asian Financial Crisis 1997 • US’s Subprime Crisis 2007 • Spain’s Sovereign Debt Crisis 2010s
RIR and Subprime Crisis
RIR v Spain Housing Bubble
http://www.imf.org/external/pubs/ft/scr/
2009/cr09129.pdf
-9%
• RIR dropped to -1% (2002-2006);
• RIR rised to 2% (2007).
RIR v Spain Housing Price
Econometric Analysis
Econometric Results Variable Model 1 Model 2 Model 3
Dependent
Variable yoy_HPI yoy_HPI dlog(HPI)
constant -5.122 -3.137*** -0.004*
yoy_GDP 2.092*** 1.815*** ---
yoy_UNE 0.061*** -0.009 ---
RIR -0.912*** --- ---
RIR_Before --- -1.475*** -0.003***
RIR_After --- 1.238*** 0.004**
dlog(GDP) --- --- 1.494***
dlog(UNE) --- --- -0.057**
RIR and HPI Singapore
67
-.3
-.2
-.1
.0
.1
.2
.3
.4
-.08
-.06
-.04
-.02
.00
.02
.04
.06
01 02 03 04 05 06 07 08 09 10 11 12 13 14
PI_SIN_URA_YOY RIR_SIN_3M
Econometric Results
Variable Model 1
Dependent Variable yoy_HPI
constant 0.008
yoy_GDP 0.375**
yoy_UNE -0.350
RIR -1.603**
RIR Theory Supported by HKMA
• “Undeniably, real interest rate is one of the major determinants of social total demand, both theoretically and practically… Asset price change would be determined by long term real interest rate change.”
• 『無可否認,實質利率在理論和實際上都是決定社會總需求的重要因素。…資產價格的變動方向將會取決於長期實質利率到底預期上升抑或下跌。』(金管局季報8/1999)
( ) ( ) ( )
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a
r
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> -
=
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and if
1
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2 1 0 K
Yiu, C.Y. and Hui, E.C.M. (2005). Capitalization Rate and Expected Return:
A Cointegration Analysis in a Housing
Market, Journal of Real Estate
Education and Practice, 9(1), 19-35.
Conclusions
•Real interest rate is the cause of housing unaffordability, but the government dare not manage it.
•Land supply is found not to be a cause of housing unaffordability, but the government rezones green belts and wants to develop countryparks and reclaim more land.