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Millennial Perspectives on Housing and Land Supply

Affordability still concerns young people in Hong Kong


Investor sentiment is rebounding in the residential property market, with third quarter capital values rising at their fastest pace since 3Q12. Buoyed by a strong land sales market and attractive new launches, average monthly home sales reached 5,032 units in July-August, up from 4,517 units in 3Q15, ending several months of lacklustre activity.

Six out of eight residential sites sold by government tender in 3Q16 beat market estimates. Cheung Kong Property Holdings acquired a residential site near Sha Tin for HK$ 1.953 billion, surpassing high-end market expectations by 33 per cent. The trend continued into October when the purchase of a government site by Kerry Properties in Beacon Hill for HK$ 7.268 billion made the headlines for being Kowloon's most expensive land sale. The land is expected to yield 270 luxury flats and houses.

Some investors sought redevelopment opportunities. In 3Q16 Carnival Group acquired a 22,398 sq ft residential site in Shouson Hill for HK$ 1.3 billion, while CSI Properties paid HK$ 780 million for Maryknoll Quarters in Stanley, reportedly to convert the property to residential use. 

Together these market highlights indicate a positive outlook for Hong Kong's property sector, but how does the new generation of valuers view Hong Kong's property future? 

The first thing they'll tell you is that many young people doubt they will be able to afford to buy property in Hong Kong. "Housing prices seem to continue rising no matter how much supply is provided," says Pinky Li, a Manager with JLL's Valuation Advisory Services (VAS) team.


While the government ramps up land sales to reach its private housing supply target of building 190,000 units in the 10 years to 2025, smaller units are being developed. Developers maintain that these micro-apartments also cater for buyers with smaller incomes, but Kevin Li, Assistant Manager, VAS, believes "it's a misconception that units of 180-200 sq ft are affordable because if you look at the unit rate, it's not cheap." Head of VAS CK Lau sees the tiny flats as a response to market constraints, but acknowledges that if they don't meet buyers' needs, they may be unsustainable in value terms.

Ideally, says Lau, the government will put out to tender a steady supply of land, "so people in Hong Kong know what supply will be coming onto the market. Apart from residential, we also need land for commercial, logistics, warehousing and recreational uses."  

Relieving pressure on Hong Kong's densely packed urban areas raises the controversial issue of developing on green belt land. "If you start encroaching on the green belt, it will set an undesirable precedent," says Kevin Li. "Development within green belt and country parks must be a last resort. Otherwise, this valuable land could simply end up as luxury housing that residents still can't afford to buy."

Lau argues that building on "certain green belt areas," particularly those occupied by squatters and temporary structures, would free up much-needed space to serve urban residents. "The fact is that we don't have enough space in Hong Kong. All we can do is reclamation or develop green belt areas, or add to the density in urban areas," asserts Pinky Li.


To this end, VAS Manager Joan Law, believes development of brownfield sites would help meet demand from businesses looking for land for storage and distribution, and address the long-standing housing shortage. A government study on the feasibility of transforming brownfield sites in rural areas into land for housing is expected to be completed in mid-2018. 

The administration's recent decision to prioritise development of 4,000 public housing units on green belt land by uprooting three non-indigenous villages instead of a nearby brownfield site in Wang Chau, Yuen Long triggered a public outcry. Lau sees it differently. "The land is not really 'green'," he says, "it is occupied by many temporary structures and a nearby hill is used for burials. In comparison, the so-called 'brownfield' sites have been planned for open storage purposes for a long time and are actively used as such." The agricultural plot could reportedly yield an extra 13,000 flats.

Public objections certainly make it harder for the government to release rural land for development. "When we blame officials for not addressing housing shortages, maybe we should first take a balanced view about environmental concerns, protecting our heritage and providing homes for Hong Kong residents," suggests Law.

The VAS team agrees that the government should speed up the planning process for new developments and supporting infrastructure, as well as lease modification and land exchange processes. Development of Kai Tak, for example, could offer up to 50,000 private and public flats and 2.3 million sq m for commercial and hotel use, according to Secretary for Development Paul Chan. But public consultation over the government's proposed plans is still ongoing, 18 years after the old airport closed. 

"Nearby cities are developing very fast. When you have that kind of competition, you need to look at where you want your city to be in five or ten years' time," says Lau. "We need action and answers for Hong Kong and for our next generation."​

For more information on JLL's Valuation Advisory Services, visit our dedicated webpage or contact CK Lau.

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