Land and Housing Supply in Hong Kong

1

Land Supply Forum, Apr, 2016

Edward Yiu 姚松炎

Associate Director, IOFC 未來城市研究所副所長

Associate Professor, CUHK 中文大學副教授

10-year Ave Min Max

Household Net Increase

294,000 271,950 316,050

Re-housing 46,300

Poor Living Conditions

74,900

Others 34,500 27,000 42,000

Total 449,700 420,150 479,250

Vacant Units 20,300 19,850 20,750

Adjusted “Demand”

470,000 440,000 500,000

Long Term Housing Strategy 2013

Total Household Formation

3

20000-

30000/yr

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Housing Completion

No of Households increased

Source: RVD (2015) and CSD (2015)

Year Population No. of Households NoH Change/Yr

NoH yoy %

1991 5,752,000 1,601,900

2001 6,714,300 2,054,500 45,260 2.8%

2011 7,071,600 2,359,300 30,480 1.5%

2021* 7,662,000 2,554,000 19,470 0.8%

2031* 8,160,900 2,720,300 16,630 0.7%

2041* 8,469,000 2,823,000 10,270 0.4%

Sharp Decrease of NoH yoy

Population and Households HK

LTHS=29,400

5

Housing Price v. Fertility

http://www.devilsdictionaries.com/blog/housing-prices-and-fertility-rates

[1] Li, P. & Xu, J.(2012) Housing price and fertility rate, CEJ 5, 97.

[2] Yi,J. & Zhang, J. (2010) House Price on Fertility: Evidence From Hong Kong, EI

48, 635.

6

Housing Price v. Fertility

Source: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026127/oecd-

educational-report-pisa-fever-is-causing-east-asias-demographic-collapse/

Hong Kong 1981 2012 2041

Declining fertility rate Number of live births per woman

1.9

1.3

1.2

Total Housing Completion

7

0

10000

20000

30000

40000

50000

60000

2002-3 2003-4 2004-5 2005-6 2006-7 2007-8 2008-9 2009-10 2010-11 2011-12 2012-13 2013-14 2014 -15*

2015 -16*

2016 -17*

Total Subsidized Housing Completion

Private Housing Completion

Total Housing Supply

>40000/yr

Year Total No. of

Housing Units

YoY Change YoY Change %

1983 1,111,000

1993 1,696,000 58,500 5.3%

2003 2,332,000 63,600 3.8%

2013 2,616,000 28,400 1.2%

2021* 2,936,000 NA NA

2031* 3,336,000 40,000 1.4%

2041* 3,736,000 40,000 1.2%

Housing Completion HK

Year Total No. of Housing Units

Total No. of Households

Housing Stock – Households

1983 1,111,000 1,334,300 -223,300

1993 1,696,000 1,677,700 +18,300

2003 2,332,000 2,114,000 +218,000

2013 2,616,000 2,404,800 +211,200 (8%)

2021* 2,936,000 2,554,000 +382,000 (13%)

2031* 3,336,000 2,720,300 +615,700 (18%)

2041* 3,736,000 2,823,000 +913,000 (24%)

Supply>Demand, Now and Future

40,000 pa 10,000 pa

Housing Sold (1st Hand)

10

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*

1st hand Sold Out Units (TV1)

Cumulative Sellable Units

Approved to sell Units

Demand Range from 11,000 – 25,000 units pa

Land Supply > Demand

11

http://www.wwf.org.hk/en/?14400/WWF-

rapid-response-cons-20151109#

• The demand for housing will not

continuously increase

• Both the land and housing supply are

more than adequate

• It is clear that there is no justifiable need

or reason to sacrifice our valuable

natural environment; indeed, it is more

important than ever to preserve our

natural heritage for future generations.

Birth and Death 1961 -2041

0

20,000

40,000

60,000

80,000

100,000

120,000

65 70 75 80 85 90 95 00 05 10 15 20 25 30 35 40

BIRTH DEATHSource: CSD (2015) and

http://www.statistics.gov.hk/pub/B1120015052012XXXXB0100.pdf

Forecasts

2027

Ageing and Housing Supply

• A commonly ignored source of housing

supply;

• Housing supply does not necessarily come

from new developments;

• If pass-away are home owners, their property

would be resold or transferred to other users;

• With the ageing trend, downsizing activities

would also be increasing, which can increase

housing supply.

If Insufficient

14

Insufficiency

Visitors (68,000 units)

Expatriates / Students

(10,000?)

Mobile Residents (100,000

units) Vacancy (46,000 units) & Others

Natural Pop

Growth

Rehousing Need

Investment Need

Type Est. Qty

MR 100,000

Visitors 68,000

Vacancy 46,000

Ex/S 10,000

Total 224,000

S - D 211,200

Population Related

Implications on Land Supply

15

Case Housing Units Required

Land Required (ha)

Baseline Case 35,000 pa 35 pa

Each floor area of each block = 4,000sf

@25-storey

Site area = 100,000 sf, pr = 5, sc = 20%

Total 1,000 housing units

500 sf / unit

8-unit per storey

Total 3,000 persons

5 blocks

Implication on Land Needs

16

• 2014-2017

• 35ha pa

Short Term

• 2018-2024

• 25ha pa

Medium Term

• 2025-2041

• 15ha pa

Long Term

Land Demand <> Needs

Include roads , etc.

Say 50 ha pa

17

Land Supply (May 2013) Developable Land Area (ha) Housing Units

GIC 27 11,900

GB (1st Batch – deserted) 57 23,000

I 30 20,400

URA 4.9 4,700

Railway 33 8,700

Quarry 27 15,000

Streamline Process 130 45,000

Total 309 128,700

http://www.legco.gov.hk/yr12-13/chinese/sec/library/1213in21-c.pdf

Accommodating (2013-2017) 4-year Demand

18

Land Supply (Processing) Developable Land Area (ha)

Kowloon East 35

MTR 90

Vacant Government Land (zoned for residential use)

391.5

Rezone I to R 60

Accommodating (2017-2021) 100,000

Households

19

Land Supply (Supported by the Public )

Developable Land Area (ha)

Urban Renewal 50

Brownfield 1,200

I zoned Land (Remaining) 1,400

Accommodating (2021-2041) 450,000

Households

Develop Green Belts?

Urban

Green belt

Countrypark

London’s Approach to the Green Belt

Importance of GB 1. England’s 14 GB covers nearly 13% of England,

2. Provide a breath of fresh air for 60% of the population – 30 million

people – living in the urban areas within GB boundaries

3. New surveys show that 95% of people value the beauty of the GB

4. 58% have visited for leisure in the past 12 months

Fresh Approach to the GB 1. Recognise and protect the Green Belt

2. Invest in and improve the Green Belt

3. Connect and network the Green Belt

Approach to Development • Brownfield First Policy

CPRE (2010) Green Belts: a greener future,

http://welwynhatfield.co.uk/wp-content/uploads/2012/04/green-belts-

a-greener-future-summary.pdf

London’s Greenbelts

“The overall area covered by the designated Green Belt has doubled

since 1978. In some cases this incorporates expansion of Green Belt

intended to offset the loss of areas to new development.

http://welwynhatfield.co.uk/wp-content/uploads/2012/04/green-belts-a-greener-future-summary.pdf

Planning Purposes of GB

• The main purposes of the GB zone include the following:

• To conserve existing landscape features, areas of

scenic value and areas of recognised “fung shui”

importance;

• To define the outer limits of urbanized districts and to

serve as a buffer between and within urbna areas; and

• To provide additional outlets for passive recreational

uses. (TPB PG-NO. 10)

• To primarily conserve the existing natural environment

amid the built-up areas/at the urban fringe,

• to safeguard it from encroachment by urban type

development,

• to define the limits of urban and sub-urban

development areas by natural features,

• to contain urban sprawl as well as

• to provide passive recreational outlets,

• with a general presumption against development. – Sources:

– OZPs

– S.3.5.2, Ch. 10 Conservation, Hong Kong Planning Standard and Guidelines, Aug. 2010 Edition,

HKSAR Government http://www.pland.gov.hk/pland_en/tech_doc/hkpsg/full/ch10/ch10_text.htm

Planning Intentions of GB

Various Conditions of GB

Various Conditions of GB

Appropriateness of Rezoning GB for

Residential Use

GB

- Conservation

- City Boundary

- Recreational

Uses

Residential

Use？

Rezoning

Are the original functions

of the GB sacrificed?

Principles in Rezoning GB

GB should not be rezoned unless:

1. It does not serve the required functions of a GB – devegetated, deserted or formed land;

2. The new use can better serve the required functions – upgraded to SSSI, countrypark, etc.

GB policy should be reviewed by a long term strategy of territorial planning, rather than a piecemeal approach of rezoning.

Development Bureau’s

Approach

Review Standard

Phase I Phase II

Devegetated Area > 0.5ha, Slope < 20⁰

Deserted Next to developed area

Formed Land Next to transportation means

Lower value in limiting boundary

and conservation

〈局長隨筆〉 http://www.devb.gov.hk/tc/home/my_blog/index_id_80.html

Private Applications for GB Rezoning

were mostly Rejected Application for GB Rezoning (1997-2014) – by districts

District Approved Rejected Total Rejection

Rate

HKI 3 4 7 57.14%

Wong Lai Chung 0 2 2 100.00%

North Point 0 1 1 100.00%

Pokfulam 1 0 1 0.00%

Peak 2 0 2 0.00%

Quarry Bay 0 1 1 100.00%

KLN 0 0 0 --

NT 4 26 30 86.67%

SS/Fanling 0 9 9 100.00%

Tsuen Wan 0 2 2 100.00%

Tsuen Wan W 0 4 4 100.00%

Tai Po 1 2 3 66.67%

Shatin 1 1 2 50.00%

Ma On Shan 0 1 1 100.00%

Kwun Tong S 0 2 2 100.00%

Sai Kung 0 2 2 100.00%

Lantau I S 2 0 2 0.00%

Tuen Mun 0 2 2 100.00%

Yuen Long 0 1 1 100.00%

全港 7 30 37 81.08%

30 out of 37 applications

were rejected (81%)

Rejection Reasons

15

10

11

10

10

11

1

8

5

5

19

24

1

9

10

2

0 5 10 15 20 25 30

與「綠化地帶」的規劃意向相違背

發展過度密集

影響景觀/砍樹

影響交通

影響污水/排水/基礎設施

影響環境

山泥傾瀉的風險

影響城市設計/視覺效果

影響政府、機構或社區設施

影響休憩用地的供應

資料不足

不良先例

涉及政府土地

在規劃研究完成前改劃為時過早

危害完整的土地規劃

減少為應付丁屋發展需求的土地供應

Number of Applications

否決

原因

Rejection Reasons

Violation of the planning intentions of GB

Set bad precedents

Insufficient Information

Case Study

Functions GB

Conservation Woodland, next to countrypark, important habitat

Buffer Limiting urban encroachment into countrypark

Passive

Recreation Popular hiking trail

Performing the Functions of GB

Buffer between a countrypark and the developed area

http://www2.ozp.tpb.gov.hk/gos/default.aspx

Ecological Value of GB

Limnonectes

Polypedates_megacephalus

marsh frog

Public Opinions on GB

Study Area：

Period：Mid

Jun 2014

No. of

Sample：

312

Method：

Public Opinion Survey Results

96.8%

2.9%

0.3%

A. Conservation Function

有

無

無意見 78.5%

19.9%

1.3% 0.3%

B. Limit Urban Sprawling

有

無

無意見

不一定

85.6%

13.1% 1.3%

C. Passive Recreational Function

有

無

無意見

Opinion of GB Rezoning?

22.8%

6.7%

74.0%

1.6%

Agree or Disagree with the Govt’s GB

Rezoning Application?

贊成發展作公營房屋

贊成發展作私營房屋

不贊成

無意見

會破

壞生

態

減少

綠化/

公共

休憩

空間

危害

郊野

公園

城市

會過

度擴

張/發

展

其他 沒有

列明

不贊成的原因 67.5% 72.7% 39.0% 39.0% 19.5% 1.7%

67.5% 72.7%

39.0% 39.0%

19.5%

1.7% 0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%百

分比

(%

)

不贊成的原因

Disagree

Agree to build private housing

Agree to build public housing

Opinions on Other Land Supply

市區重

建 填海

重建政

府、機

構/社區

用地

（如學

校及社

區會

堂）

發展棕

土（如

露天貨

櫃場及

停車

場）

發展岩

洞（如

搬遷沙

田污水

處理

廠）

開發鄉

郊土地

發展綠

化地帶 其他

增加土地供應以配合未來發展的方法 59.3% 12.2% 30.4% 40.1% 7.4% 18.9% 4.2% 5.4%

59.3%

12.2%

30.4%

40.1%

7.4%

18.9%

4.2% 5.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

百分

比 (

%)

UR Rec GIC BF Car Rur GB Oth

Opinions on GB Rezoning Application

91.3%

7.1% 1.6%

GB should be protected?

應該

不應該

無意見

12.8%

86.2%

1.0%

GB rezoned to private

housing?

贊成

不贊成

無意見

Should

Should not

Develop Brownfields?

41

Lau, T.L. (2015) Cost-benefit analysis of residential

development in brownfield and greenfield, FYT,

GRM, CUHK (supervised by CY Yiu)

Economic Benefits Comparison

42 Lau, T.L. (2015)

Social and Environmental

Benefits Comparison

43

Lau, T.L. (2015)

Benefits Comparisons

44 Lau, T.L. (2015)

CBR Comparison

45 Lau, T.L. (2015)

Brownfield Greenfield

Economic Cost $2,204,405,090 $1,769,460,000

Economic Benefit $7,932,049,200 $3,054,371,407

Economic CBR 1:3.60 1:1.73

Brownfield/Greenfield

Economic CBR Ratio 2.08

Total CBR Ratio 3.75

Brownfield First HK

46

• 1200 ha brownfield in HK

• Mostly are originally farmland

• But are converted into container

depots and storage sites, etc.

Why Housing is Unaffordable?

Housing Supply

Land Supply

Insufficent

Ultra Low IR

High Inflation

Real Interest

Rate

Housing Supply is NOT Correlated with Housing Completion

Bauhinia Foundation Research Centre (2014) Relationship between Proportion of

Private Housing Completions, Amount of Private Housing Completions, Property

Prices in Hong Kong, http://www.bauhinia.org/document/doc186eng.pdf

“There is no relationship between the proportion of

private housing completions and property prices in

terms of their correlation coefficient.” (Bauhinia

Foundation Research Centre, 2014)

『從相關係數而言，私人住宅落成量與樓價之間沒有任何關係。』(翻譯自智經研究中心,2014)

Housing Supply and Price

49 0

5000

10000

15000

20000

25000

30000

35000

40000

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

yoy HPI

Completions (RVD)

High, High

High, Low

Low, High

相關係數 = -0.29

Land Supply and Vacancy

50 Wang, H., Zhang, C. and Dai, W. (2013) Rental Adjustment and Housing Prices: Evidence from

Hong Kong’s Residential Property Market, HKIMR Working Paper No. 01/2013

http://www.hkimr.org/uploads/publication/346/wp-no-01_2013-final-.pdf

High, Low

Med, High

Low, Low

Land Supply is NOT a Cause

“the coefficient of land supply index is [positive], which contradicts

with the theoretical prediction that increases in land supply have a

dampening effect on house prices in the long run. On a second

thought, this may reflect an impact in the reverse directly, i.e. higher

house prices provide an incentive for developers to build up new

residential property projects” (Glindro et al., 2007)

『土地供應指標的係數為[正]，驗證結果與理論預測相違背，增加土地供應從長遠而言，並未對房價起壓抑作用。退一步講，這可能反映相反的因果影響，即提高房價反而激勵開發商構建更多新的住宅物業項目。』(翻譯自Glindro et al.,2007)

Glindro, E.T., Subhanij T., Szeto, J. and Zhu, H. (2007) Are Asia-Pacific Housing

Prices Too High For Comfort?, BIS paper

http://www.bis.org/repofficepubl/arpresearch_fs_200806.06.pdf

Wheaton’s Model

Property Market:

Stock Adjustment Construction (sq. ft)

Asset Market Construction

Price $ Stock (sq. ft)

Property Market:

Rent

Determination

Rent $

P=R/i

Asset

Market:

Valuation

S=C-S P = f(C)

Price -> Supply

DiPasquale-Wheaton’s (1992) Model

Real Interest Rate Effects

• Casual Observations

1996 2001 2006 2011

HIBOR % 5.48 3.44 4.21 0.27

CPIA yoy % 6.31 -1.60 2.03 5.51

RIR -0.83 5.04 2.18 -5.24

HPI (yr end) 134.5 73.8 93.8 181.1

Asian Financial Crisis

RIR v HPI

• 相關系數-58%;

Econometric Analysis

正實質利率與負實質利率效應

實質利率效應

d(RIR) Explains d(HPI)

-2.61%

-0.83%

Yiu, C.Y. (2009) Negative real interest rate and housing bubble implosion – an

empirical study in Hong Kong, Journal of Financial Management of Property and

Construction, 14(3), 257-270

Global Financial Crisis 2007

Housing Bubble Predicted (Oct 28, 2009)

CCL in 2009 = 75;

CCL in 2015 = 144

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1434312

Yiu, C.Y. (2009/07/15) Negative Real Interest Rate and Housing Bubble Implosion - An Empirical Study in Hong Kong, SSRN

RIR Theory Prediction

Dipped into Negative Zone since Nov 2008;

Negative Today– 2%

It Explains Many Bubbles

• Japan’s Lost Decade 1980s • HK Asian Financial Crisis 1997 • US’s Subprime Crisis 2007 • Spain’s Sovereign Debt Crisis 2010s

RIR and Subprime Crisis

RIR v Spain Housing Bubble

http://www.imf.org/external/pubs/ft/scr/

2009/cr09129.pdf

-9%

• RIR dropped to -1% (2002-2006);

• RIR rised to 2% (2007).

RIR v Spain Housing Price

Econometric Analysis

Econometric Results Variable Model 1 Model 2 Model 3

Dependent

Variable yoy_HPI yoy_HPI dlog(HPI)

constant -5.122 -3.137*** -0.004*

yoy_GDP 2.092*** 1.815*** ---

yoy_UNE 0.061*** -0.009 ---

RIR -0.912*** --- ---

RIR_Before --- -1.475*** -0.003***

RIR_After --- 1.238*** 0.004**

dlog(GDP) --- --- 1.494***

dlog(UNE) --- --- -0.057**

RIR and HPI Singapore

67

-.3

-.2

-.1

.0

.1

.2

.3

.4

-.08

-.06

-.04

-.02

.00

.02

.04

.06

01 02 03 04 05 06 07 08 09 10 11 12 13 14

PI_SIN_URA_YOY RIR_SIN_3M

Econometric Results

Variable Model 1

Dependent Variable yoy_HPI

constant 0.008

yoy_GDP 0.375**

yoy_UNE -0.350

RIR -1.603**

RIR Theory Supported by HKMA

• “Undeniably, real interest rate is one of the major determinants of social total demand, both theoretically and practically… Asset price change would be determined by long term real interest rate change.”

• 『無可否認，實質利率在理論和實際上都是決定社會總需求的重要因素。…資產價格的變動方向將會取決於長期實質利率到底預期上升抑或下跌。』(金管局季報8/1999)

( ) ( ) ( )

( ) ( )

( ) ( )

( ) ( )

g r T g r

a

r

g a

r

g a

r

g a

r

g a

r

a P

T

t t

t

T

T

> -

=

+

+ =

+

+ + +

+

+ +

+

+ +

+ =

=

-

-

and if

1

1

1

1

1

1

1

1

1

1

1

1

3

2

2 1 0 K

Yiu, C.Y. and Hui, E.C.M. (2005). Capitalization Rate and Expected Return:

A Cointegration Analysis in a Housing

Market, Journal of Real Estate

Education and Practice, 9(1), 19-35.

Conclusions

•Real interest rate is the cause of housing unaffordability, but the government dare not manage it.

•Land supply is found not to be a cause of housing unaffordability, but the government rezones green belts and wants to develop countryparks and reclaim more land.