Urban premium to stay as supply rises

Overseas Education | Jeannie Tang 15 Feb 2018

Jeannie Tang

Total new flat supply is potentially more than 97,000 units in the next three or four years, according to latest data from the Transport and Housing Bureau.

Midland Realty estimates that 61,000 of the flats will be provided in the New Territories, while 25,000 units are earmarked for Kowloon, and 10,000 on Hong Kong Island.

Midland's chief analyst Buggle Lau Ka-fai said as home supply on Hong Kong Island is traditionally the lowest, its property prices will remain the highest.

He predicted flat prices in both Kowloon and Hong Kong Island will continue to rise more than in the New Territories despite the fact that various new infrastructure projects are being launched in the rural areas.

One major reason is that people generally prefer to live near core SAR areas, and besides, home prices in the New Territories have already jumped a lot in recent years, and therefore, future increases will be slower.Lau said Hong Kong will see more supply of small and medium-sized flats, and he believes prices of the relatively inexpensive smaller flats will see slower rises than last year due to fierce competition in both the private and public housing markets.

In the luxury market, he doesn't expect the prices of upscale homes in the New Territories to climb substantially, but sees the luxury market continuing to flourish in the traditional high-end districts.

Leo Cheung Sing-din, corporate development director for valuation and property management at Pruden, said new housing supply will be mainly located in new development areas such as the Kai Tak residential plots, and Anderson Road in Kowloon, as well as So Kwun Wat in Tuen Mun, and Lohas Park in Tseung Kwan O.

While noting that first-hand home supply doubled within the past five years - satisfying the demand for new property - Cheung said total supply remains insufficient if one takes into account the trading volume in both the primary and secondary markets.

Amid the upcoming new property supply in the New Territories, Cheung said, the main disadvantage lies in locations that are less convenient, but the advantage is the potential opportunity for rising prices.

Recently, some new properties in the New Territories were priced aggressively, leading to a short-term effect of narrowing the gap between prices in urban centers.

However, he believes the urban properties will continue to outperform in the long term.

Last year new residential supply in Hong Kong totaled 18,000 units, with 27 percent of it in Kowloon, and 60 percent in the New Territories - much of it in Yuen Long.

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