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Executive Summary

Private housing outlook
We forecast that the average annual completion of private residential units will be
20,800 between 2018 and 2022, which exceeds the supply target set by the Long Term
Housing Strategy (LTHS) and is also 78% higher than the average of the preceding decade.

Despite the increase, it is insufficient to compensate for the shortfall accumulated
over the past years. Specifically, a cumulative deficit of some 63,000 units remains when
taking into account the annual average completion of 11,700 units between 2008 and
2017 with a supply target of 18,000 units.

Additionally, unit sizes on average are shrinking as developers are building smaller
flats to cater for entry-level demand as private housing becomes increasingly unaffordable.
The average size of all completed private housing units is expected to equate 681 sq ft
between 2018 and 2022 (or 18% smaller than the average of 833 sq ft in the preceding
decade). Previously thought as an unreal and unpopular form of housing, supply of “nano-
flats” is estimated to reach over 1,000 units per year by 2019. More importantly, if the
shrinkage of unit size is taken out of the equation, then the adjusted completion rate of
private housing between 2018 and 2022 is only 16,900 units per annum, falling short of
the LTHS target of 18,000 units per annum.

This is a reversal of the steady size-growing trend of residential units completed
between 2000 and 2008 when the average home size was generally getting bigger. It is
paradoxical that Hong Kong is moving backward with a significant drop in living quality
where people are having to buy less for a much higher cost.

Public housing outlook

In our previous reports, we have repeatedly indicated how the supply of public
housing trails significantly. It is well-known that the total number of applicants on the
waiting list for Public Rental Housing (PRH) has risen to over 280,000.

Despite the urgency of the situation, we estimate that only some 217,400 PRH and
Home Ownership Scheme (HOS) units can be constructed in the next 10 years (2018/19
- 2027/28). This is lower than the government’s forecast and falls 22% short of its target to
provide 280,000 public housing units over the period.

Going forward, more uncertainty and unpredictability in the supply of public
housing must be taken into account because development projects as planned are heavily
reliant on rezoning, a form of land supply which typically falls under heavy public scrutiny
and even lengthy judicial review processes, particularly for Green Belt sites.

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