No new application for compulsory sale in Q1 this year

HONG KONG, 29 April 2024 – No new application for compulsory sale of old buildings recorded in the first quarter of 2024 after the number of applications dropped to the lowest level since 2004, according to JLL's latest Residential Market Monitor released today.

Private development and redevelopment projects through acquisitions of land and ownership have been significant sources of land supply in urban area. Despite the number of private buildings aged 50 years or above climbing to over 9,600, the rate of redevelopment facilitated by compulsory sales has decelerated. The number of compulsory sales applications dropped from 22 in 2022 to five in 2023 and dropped further in the first quarter of 2024. This deceleration underscores the cautious sentiment prevailing in the market.

Norry Lee, Senior Director of Projects Strategy and Consultancy Department at JLL in Hong Kong, said: " With the removal of cooling measures, developers unifying ownership for redevelopment are now exempt from paying stamp duties—a significant shift from the previous system where refunds could take several years. Concurrently, the Hong Kong Monetary Authority has eased financing caps for property development projects. Also, the anticipated reduced ownership threshold of compulsory sale applications could facilitate progress in projects where developers have already met the necessary ownership threshold. However, developers' appetite for investment may remain lacklustre amid tight liquidity and high interest rates. This caution is reflected in the intense price competition in the primary market and the stagnation of land sales,”

A key indicator of housing supply is the number of private residential units commenced construction. This figure has dropped to a total of 28,000 units for 2022 and 2023 combined, mirroring levels seen in 2003-04, following the government’s stringent land supply controls known as “Suen's Nine Measures”. For 2024, projections suggest that the commencement of new private residential projects will remain subdued.

Cathie Chung, Senior Director of Research at JLL in Hong Kong, said: "Evidence from land supply confirm this downward trend in supply. The estimated flat production from private housing land supply in FY2023-24 has fallen to 14,000 units, representing a decrease of 12.8% and 32.0% compared to FY2022-23 and FY2021-22, respectively. In FY2024-2025, the government has set a target of 15,150 units from private housing land supply. We believe this target is unlikely to be achieved, as several sites in this Land Sale Programme carry a relatively high risk of withdrawal under the current market situation. The anticipated private residential completion in 2026-28 drop significantly from the highs of 2024-25.”