🏙️ Real estate market supply and demand analysis: population, land supply and policy impact

Hong Kong's property market has remained consistently high, practically a global phenomenon. Why have Hong Kong property prices remained so consistently high? The answer lies in the relationship between supply and demand . Today, we'll delve into how demographic changes, land supply, and government policies influence Hong Kong's property market, and offer several key insights to help you make more informed decisions when purchasing or investing in a property.

🔑 Basic concepts of property market supply and demand

1. Demand 👥

This refers to the housing demand of citizens or investors, including those for self-use, investment, and rental purposes. Demand is influenced by population growth, family structure, income levels, and investment sentiment.

2. Supply 🏗️

This refers to the actual number of homes available on the market. Supply is affected by land release, planning procedures, construction cycles, and government policies.

When demand exceeds supply, house prices will rise; conversely, when supply exceeds demand, there will be downward pressure on house prices.

👥 Impact of demographic factors on the property market

Population growth and housing demand📈

• Hong Kong's population has increased from approximately 4 million in the 1970s to 7.4 million in 2021. This population growth directly drives housing demand.
• Even though the birth rate has declined, the demand for housing continues to increase due to the smaller family structures (such as single people and small families), with the average number of residents per household dropping from more than 4 in the 1990s to about 2.7 now.

Population aging and home ownership patterns 👴👵

• Hong Kong is rapidly entering an aging society, with the proportion of the population aged 65 and above increasing year by year.
• Older people may choose smaller units, senior housing, or transfer their properties to the next generation. This shift will affect the liquidity of supply in the market.

New immigrants and cross-border factors 🌏

• With the integration of the Greater Bay Area, the demand for immigration from the mainland has increased, and some high-income people have chosen to buy property in Hong Kong.
• But at the same time, some young people in Hong Kong choose to move overseas, which may release some supply and have a two-way impact on the property market.

🏗️ Impact of land supply on the property market

Limited land supply🚧

• Hong Kong has a land area of ​​approximately 1,100 square kilometers, but less than 25% of this land is actually developable.
• In the past, the government slowed down its pace of developing new towns, and land supply has been tight for a long time.

New Territories land and brownfield issues 🌳

• The New Territories have a vast area of ​​brownfield and farmland, but the interests involved are complex and the pace of development is slow.
• Areas along new railway lines often become hot spots for house price increases.

House construction is lagging behind 🏗️

• From planning to completion, it often takes eight to ten years. Even if the government speeds up land allocation, it will be difficult to increase supply immediately in the short term.

🏦 Impact of government policies

Control demand policy📉

• Additional Stamp Duty (SSD) : Crack down on short-term speculation.
• Buyer’s Stamp Duty (BSD) : Restricts the purchase of residential properties by non-local buyers.
• Double Stamp Duty (DSD) : levied on properties with a second floor or above.
• The above policies led to a decline in investment demand, and real estate transactions were under pressure for a time.

Promoting supply policies📈

• Long-term housing strategy : The government has set a 10-year supply target to increase public and private housing development.
• Northern Metropolitan Area Planning : Release land in the New Territories and increase supply in the long term.
• Simplify procedures : speed up approval and development.

Financial regulatory policies🏦

• Loan-to-value ratio limits : curbing excessive leverage.
• Stress testing : ensuring borrowers can withstand interest rate hikes.
• Although these measures may cool demand in the short term, they will help the healthy development of the market in the long run.

📊 Supply and demand imbalance case

2003–2009 🏠

• The population continued to grow after SARS, but supply was limited.
• Thanks to the low interest rate environment, demand has increased rapidly and housing prices have rebounded from the bottom.

2010–2018 🚀

• The government has released land several times, but the supply has not kept pace with the growth in demand.
• During the same period, funds were flooding, investment demand was high, and housing prices rose to historical highs.

2019–2023 ⚠️

• Tightening policies and immigration have weakened demand;
• But supply is still limited, so although house prices have fallen, the decline is limited.

🧐 What can we learn from supply and demand?

1. Population growth drives long-term demand : Even with economic fluctuations, changes in population and family structure remain the largest source of demand.
2. Land supply is the core issue : insufficient supply has caused the housing market to remain high for a long time.
3. Policies can only be used for short-term regulation : stamp duty and mortgage regulations can affect demand, but structural supply problems are difficult to solve.
4. Long-term imbalance between supply and demand : Hong Kong property prices are unlikely to fall sharply unless there is a major economic or financial crisis.

💡 Editor's Tips

• When buying a property, you should consider the supply plan : properties located along new railway lines, in the Northern Metropolitan Area, and in the Kai Tak Development Area have higher potential for future appreciation.
• Pay attention to policy direction : if the government relaxes stamp duty or increases land release, it will immediately affect the market atmosphere.
• Don’t blindly wait for a surge in supply : Based on Hong Kong’s past experience, the rate of supply growth will never catch up with demand.
• Long-term thinking : The supply and demand structure of the real estate market is tight, and there is still support in the long run.

📌 Summary

Hong Kong's property market has remained stubbornly high for a long time. This is due to a persistent shortage of land supply, coupled with growing population demand and policies that focus on short-term regulation and fail to address structural issues. While property prices may fluctuate in the short term due to policy changes or economic fluctuations, the imbalance between supply and demand remains the core factor supporting property prices in the long term.

Finally, I want to say this: the Hong Kong property market is like a game of musical chairs. There are more and more people, but the number of chairs (units) is limited. As a result, everyone is forced to grab them, so it is difficult for property prices to fall sharply.