REVIEW ESSAY
A REVIEW ON THE LAND AND HOUSING SUPPLY IN HONG KONG
1. Introduction
Hong Kong has been undergoing ups and downs in its property market in
the past few decades. Considerable time and comprehensive planning
are required to make the provision of land and supply of housing take
place.WithrespecttotheGovernmentisthesolesupplieroflandinHong
Kong, Planning Department, 2016estimates the housing target by2026is a
provision of 460,000 units and a total of about 1,670 ha of housing land.
Due to the significantly dense population and shortage of land for
development, this review paper aims to review different researches
conducted for the land and housing supply in Hong Kong.
2. Review on Comparison and Contrast
There are generally three groups of stakeholders in these research studies,
namely (1) households who consume and look for housing, (2) property
developerswhoinvestinhousingdevelopmentandseekforprofits,and(3)
Government who imposes appropriate balance between consumers
surplus, developer profitability and other considerations like transportation
network, social welfare, public facilities, etc. Review on these studies are
mainly focused on aspects of (1) demand and supply equilibrium, (2)
planningcontrols and(3) transportation.
2.1 Demand and supply equipment
Various researches in the past decade have conducted in the
demand and supply equilibrium of land provision. A few are
selectedfor review.
Both Huang, 2015 and Hui, 2014 in their individual research analyses
whether an increase of residential land supply would lead to
increase of housing supply. Both result that new housing
completion is independent of the land supply by the Government
meaning that there is no guarantee on increase land supply that it
would directly increase the housing supply. Owing to the fact that
when the internal rate of return decreases, developers would
inevitably hold up their land and pending the development for a
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better time of investment return. In this regard, developers’
approach in land banking would not solve the housing problem
shortage even when the Government releases more land for
residential uses. Besides, it is understandable that being
commercially focused enterprises, developers’ behavioral
Economics on rate of return also reduces its motivation to develop.
Despite construction delay is common in place, completion of
housing development also drops if the housing price increases.
Huang, 2015 advises that more land provision in districts of low land
prices would give more incentives to developers as urban areas
withhighlandpricesarehelduplongerunderthestudy.
On other hand, Hui, 2014 summarizes the processes of housing
supply in Hong Kong. He reveals that apart from land sale, there
are other channels, eg land exchange, lease modifications, urban
redevelopment, etc., for provision land for housing. This research
analyzes the inter-relationships and correlation between housing
supply and factors/channels for provision of land and results that
landexchange has a longer term of influence on housing supply.
Ng, 2015 considers the optimal provision of housing supply from
perspectivesof threedifferentkindsofstakeholdersandthehousing
development pattern as a result of optimization where households
maximize their consumer surpluses and developers maximize their
profits. The bid-rent model developed considers the process of
household’s housing location and their commuting behaviors, then
outcomesthe land use patternandresultantprices.
In terms of housing prices, Funke, 2013 assesses in his study the
impact of housing price cycles on Hong Kong’s overall economic
cycle and finds out that housing prices are much more sensitive to
internal temporal preference differences instead of the GDP and
other consumptions.
Zheng, 2018, on the other hand, investigates the effects of income
changes on the demand for the four different types of housing,
namely public rental, subsidized housing, private ownership and
privaterentalusingtheaffordabilityindicatorofrent-to-incomeratio
under the assumption that households would adjust their housing
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requirements in case of income changes. It is resulted that the
median rent-to-income ratio for private rental housing is stable in
market-orientedeconomies of Hong Kong.
Lau, 2018 studies the increasing trend of micro-flats with saleable
floor area under 40 square meters since early 2010s. Including
further extreme cases of micro-flats, nano-flats of under 20 square
Meters emerge recently are receiving attention from the society.
Apart from affordability issue, demographic trends on declining
household sizes also contributes to this growing demand of
micro-flats. Theseflatsaremostlylocatedinmoreaccessibleurban
areas which are convenient for employment and recreation.
Given the small size, there is more affordable. People living there
are mostly young working population.
2.2 Planning control
Two researches (Hui, 2003 and Yu, 2017) have been conducted on
how Hong Kong’s planning system affects the land and housing
supply as well as the property prices. Both researches state that
the Hong Kong Government uses the planning system to regulate
the land supply and development process of urban areas where
housing supply concentrates. Such regulations, including Building
(Planning) Regulations under Buildings Ordinance (Cap. 123) and
land use zoning plans under Town Planning Ordinance (Cap. 131),
on land supply impose restrictions on the total quantity of land, their
spatial location, how they are developed and the time of
development. Town Planning Board approves the planning
applications on residential development with respect to the
regulations imposed.
Yu, 2017 derives a discrete choice model to examine the decisions
made by the Town Planning Board taking into consideration of the
variables of site-specific, application-specific, zoning-specific,
housing policy-specific and market conditions while Hui, 2003
derives a regression model with planning and economic factors
affecting the housing prices. Yu, 2017’s model results that the
approvalratefromTownPlanning Boardonhighintensity residential
development is high. With higher plot ratio on intensified
development, more supporting infrastructure on transportation and
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social services on various kinds of public facilities are required. Hui,
2003’s regression model demonstrates the planning system has
significant impact on the housing market. All the planning
variables, like planning constraints, approval rate of planning
applications,affects the housing prices statistically.
Wang,2017studiesthetransitionsofnewtowns(TinShuiWai)tonew
development areas (Hung Shui Kiu) in Hong Kong where new towns
aim to provide housing for increasing population while new
developmentareas are no longer confined to housing provisionbut
with diversified functions on employment as well as sustainable
planning concepts. Such concepts include open space,
ecological protection and improvement of living environment.
Withallthesenewdiversifiedfunctionsonplanning,theprovisionsof
developable land for housing and the cost of developments are
affected.
2.3 Transportation
Several researches are also conducted to evaluate the impact of
transportation accessibility on the property prices. He, 2020
mentioned that accessibility brought by new rail lines create new
activity opportunities. The gravity-based model reveals that the
MTR accessibility was statistically significant meaning that
households tend to value the convenience brought by the railway
and are willing to pay a higher rent or premium with good
accessibility to railway. Commuting cost is somehow diminished
and compensated by housing rent and living space in
comparatively high accessibility areas. Capitalization of public
services where close to the railway system is also resulted with
railway network.
The Hedonic Price Model derived by Jayantha, 2015 suggests that
the anticipated transport improvement also imposes a positive
impact, as kind of expected effect, on the property values near
thenewrailwaysystem. Thetransportimprovementvariableatthe
model reveals that the properties in proximity of the new
Shatin-Central Line results in increases in the property price. The
spatial price and rent gradient near the study area is also changed.
Moreover, the gentrification and further displacement of original
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households as a result of improvement of railway accessibility gives
rise in property value and decrease in sense of community in He,
2021’s study.
Huai, 2021 develops a household bid-rent and residential location
choice model to evaluate the monocentric and polycentric urban
structure. The model aims to evaluate the location equipment and
finds out that accessibility improvement capitalized the high
housing rent which reduces the affordability by households.
However, it is noted from the research result that railway
accessibility is the most effective way to bring in convenience to
household if the district is not self-contained with sufficient
employment for its households.
Yang, 2018, on the other hand, examines the impact of walking
accessibility on property prices. Though the study area is not Hong
Kong, the regression model reveals that the accessibility of walking,
being a brand new mode of travel for future sustainability, also
increases the property values.
3. Conclusion
Given the fact that household’s asset are locked up by housing property,
The property market and the overall economy in Hong Kong are inter-related.
Debates on how to maintain sufficient supply of land and housing in Hong Kong
Kongnever ends. With focusesonthe(1) demandandsupplyequilibrium,
(2) planning controls and (3) transportation aspects of review, we notice
that some of the land sold to private developers are held up as land bank
which are not readily available for development into housing for
immediate use by households. Certain planning restrictions in form of
zoning and other building requirements, like open space, public facilities,
being enforced has increased the cost of development which has
unavoidably lower the supply of land and higher the property prices. To
stabilize the amount of housing supply, the Government, through new
lease terms and modification/exchange terms, has been requiring the
lessee of land to complete the residential development within a
reasonable period of time. Togetherwithrenewalprojectsinurbanareas,
the Government now, hopefully, should have clear control on the amount
of housing supply in the upcoming years.
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