JLL: Significant reduction in land supply in Hong Kong in recent years, expected a decline in new residential supply in 2027-28.

Jones Lang LaSalle (JLL) has released a report on the Hong Kong residential property market, which points out that the short-term supply of residential properties in Hong Kong is nearing its peak. However, the number of private residential sites successfully sold by the government in recent years has decreased significantly. Based on the calculation of land parcels successfully sold by the government and public organizations, the three-year average number of residential units that can be built in the fiscal years 2023/24 to 2025/26 is approximately 6,000, a significant decrease from the past, leading to a low level of first-hand units available for sale in the 2027-28 period. Data on private residential land parcels successfully sold by public organizations in Hong Kong, including government land sales, Urban Renewal Authority projects, and MTR CORPORATION (00066) tenders, show that the number of units that can be built in the 5-year average from the fiscal years 2017/18 to 2021/22 is approximately 11,000 units per year. Subsequently, the data for the fiscal years 2023/24 to 2025/26 have significantly dropped to approximately 6,000 units per year, a decrease of about 45%. The significant decrease in land supply is mainly due to the sluggish market conditions, developers adopting a wait-and-see attitude towards land acquisition, resulting in frequent failures of tendering, leading the government to take a more cautious approach to land sales, which is expected to have a lagging impact on the supply of first-hand private residential units. Given that the development cycle from successful land acquisition to the launch of new projects in Hong Kong generally takes three to four years, the recent decrease in land supply is expected to result in a low level of first-hand units available for sale around 2027-2028. This expectation is in line with the market's general assessment, indicating that the completion and launch of first-hand units in that period may slow down, and will subsequently pick up as new development areas such as the Northern Metropolis strengthen land development, leading to a gradual recovery in supply. Lee Yuen Fung, Senior Director of Project Strategy and Advisory at Jones Lang LaSalle (JLL), stated that as oversupply gradually diminishes, developers are experiencing less pressure to sell off inventory quickly. With the backdrop of a recovering sales market, developers are in a better position to adopt stable sales strategies compared to previous quarters. Additionally, competition for limited land resources will intensify, prompting developers to more actively bid in future government land sales. Chung Cho Yu, Senior Director of Research at Jones Lang LaSalle (JLL), pointed out that the significant decrease in private residential land parcels successfully sold by the government in recent years, combined with figures from the Housing Department showing that last year's private residential construction volume hit a five-year low of only 8,800 units, further indicates a downward trend in new residential supply. In the medium term, the Hong Kong residential market is transitioning from a phase of oversupply to a period where supply and demand may become tighter. This turning point will have a significant impact on the ability of prices to resist declines, developers' strategies in land acquisition and project development, sales and marketing techniques, and is expected to provide stable support for the overall residential market prices.