Midland: Hong Kong's land sale supply in the current fiscal year may challenge the 20,000-unit level, hitting a near 9-year high.

The Hong Kong Development Bureau today announced the land sale plan for the third quarter of the current 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 roll out land and replenish land sources in an orderly manner, making the supply reserve more sufficient and laying a solid foundation for the long-term healthy development of the property market. Based on 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 the scale is only roughly equivalent to last year's full-year first-hand private residential transaction volume of about 20,000 units, while 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 rollout to actual completion and launch to the market, and it is expected that it will not bring too much supply pressure to private residential properties in the short term; on the contrary, 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 released in February this year forecast that average annual private residential completions over the next five years will be about 17,000 units, a new low since the Budget was announced, and it is believed that the peak period for private residential completions has passed. Sammy Tsang continued that, with inventory declining and demand increasing, the government's continued active land rollout not only conforms to market conditions but also demonstrates long-term planning vision. It can not only increase fiscal revenue, but also increase future supply to maintain the healthy and stable development of the property market. In fact, the private residential first-hand market supply data released by the Housing Bureau precisely reflects the trend of declining inventory. 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 plagued the market in 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%, fully showing that inventory pressure is gradually easing. On the other hand, as supply fell back from a high level, market sentiment continued to improve. In the first 9 months of this year, first-hand private residential transaction volume exceeded 14,800 cases, with value 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 declining inventory and increasing demand, developers' appetite for land bidding has also increased accordingly. Recently, developers have been actively bidding for land, with 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 Bailey Street/Che Kiang Street site in Hung Hom in July, the Tung Chung Area 106A site in May, and the Shau Kei Wan Main Street East site in February all sold at prices exceeding market expectations, fully showing developers' confidence in the outlook, while also bringing considerable revenue to the treasury. Land sale performance is closely related to property market trends. When the property market improves, buyers' desire to enter the market increases, transactions become more active, which in turn drives up property prices; when developers are optimistic about the outlook, they will also bid more actively for land, bringing positive support to the property market.