Hong Kong's Development Bureau today announced the land sale plan for the third quarter of this fiscal year (October to December), which can provide a total of 3,845 units, including the On Sum Street site in Shek Mun, Sha Tin (960 units), the Urban Renewal Authority's To Kwa Wan Road project (1,050 units), and 7 private development/redevelopment projects (1,835 units).
Together with the land sales in the first half of the year, the first three quarters (April to December) can provide a total of 15,680 units, about 24% higher than the full-year supply target of 12,600 units. Midland Realty analyst Sammy Tsang pointed out that the government continues to actively release land and has orderly replenished land sources, making the supply reserve more ample and laying a solid foundation for the long-term healthy development of the property market. According to estimates, the land sale plan supply for this fiscal year may ultimately challenge the 20,000-unit level and hit a near 9-year high; however, it is worth noting that this scale is only roughly equivalent to last year's full-year first-hand private residential transaction volume of about 20,000 units, and this year's transactions are also expected to remain at this level, showing that it is a level the market is capable of absorbing.
Sammy Tsang added that although land supply for this fiscal year has exceeded the full-year target, it still takes time for the related potential supply to go from planning and land release to actual completion and launch to the market, and it is not expected to bring too much supply pressure to private residential properties in the short term; instead, according to government forecasts, private residential completions will continue to decline. The Rating and Valuation Department estimates that completions this year will fall by about 8% year-on-year, and next year will further decline by about 9.5% to about 15,300 units. More notably, future private residential completions are on a downward trend. The Budget published in February this year forecast that the average annual private residential completions over the next 5 years will be about 17,000 units, a new low since the Budget began publishing such forecasts, suggesting that the peak period for private residential completions has passed.
Sammy Tsang continued that, with inventories falling and demand rising, the government's continued active land release not only aligns with market conditions but also reflects long-term planning vision. It can increase fiscal revenue while also increasing future supply to maintain the healthy and stable development of the property market. In fact, the private residential first-hand market supply data published by the Housing Bureau precisely reflects the trend of declining inventories. As of the second quarter of this year, first-hand private residential supply for the next 3 to 4 years fell to 96,000 units, a cumulative decrease of about 16,000 units from the record high of 112,000 units in the first quarter of 2024, and the first time it fell below the 100,000-unit level since the third quarter of 2022. In particular, the completed but unsold units that troubled the market for the past few years also fell sharply from a record high of 28,000 units to 19,000 units in the second quarter, a drop of more than 30%, clearly showing that inventory pressure is gradually easing.
On the other hand, as supply retreats from a high level, market sentiment continues to improve. In the first 9 months of this year, first-hand private residential transactions exceeded 14,800 cases, with the amount exceeding HK$190 billion (Hong Kong dollars, same below), a new high for the same period since the implementation of the first-hand ordinance in 2013. Driven by falling inventories and rising demand, developers' interest in bidding for land has also increased accordingly. Recently, developers have actively bid for land, with high-quality sites especially sought after. For example, the residential site on Fat Kwong Street in Ho Man Tin earlier received 10 tenders and was finally won for more than HK$4.3 billion, with an average land price of more than HK$20,700, far above the upper limit of market valuations. In addition, the site at Bailey Street/Che Kiang Street in Hung Hom in July, the site at Tung Chung Area 106A in May, and the site at Shau Kei Wan Main Street East in February all sold for prices exceeding market expectations, fully showing developers' confidence in the outlook and also bringing considerable revenue to the treasury. Land sale performance is closely related to the property market trend. When the property market improves, buyers' desire to enter the market rises, transactions become more active, which in turn drives property prices up; when developers are optimistic about the outlook, they will also bid for land more actively, bringing positive support to the property market.
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