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Financial Secretary


Expand Capacity through Proactive and Advance Planning

According to the latest quarterly statistics on private housing supply in the primary market published by the Housing Bureau at the end of last month, the supply of first-hand residential units for the next three to four years will be 107 000 units, including those from disposed sites where construction may start anytime, unsold units in completed projects and unsold units under construction. The figure has continued to hit a record high, representing an increase of 2 000 units as compared with the previous quarter's projection, and has been above the level of 100 000 units for two consecutive quarters.

In the past decade, this figure, which reflects the potential supply of first-hand residential properties in the short- to medium- term, has gradually increased from over 60 000 units to over 100 000 units at present. Yet, residential property prices continued to rise during the same period, reaching a historic peak in late 2021 before entering a phase of adjustment. If more units can be put in the market to meet the demand in the upward cycle of property market, people do not need to rush into the market for fear of supply shortage and the property market may develop in a more stable and orderly manner. Supply is a powerful and critical tool for adjusting prices.

Having gone through rounds of discussion over the years, the community already has a clear consensus: the shortage of land supply has led to high property prices and constrained Hong Kong's development. The Government of this term is working at full steam to enhance the speed, quantity and efficiency in land production to increase land supply on all fronts.

From a long-term, macro perspective, we have secured 7 300 hectares (ha) of land supply from different sources, well exceeding the land demand of 6 200 ha from 2019 to 2048 as indicated in the Hong Kong 2030+ Study Report.

That said, equally important to securing a good quantum of land supply is to ensure that the pace of delivery will be able to respond to changes in market demands. To allow the market to grow in a steady and orderly manner, the Government needs to have abundant land reserve (especially “spade-ready sites”) to maintain a consistently large land and housing supply throughout the years and to meet the ever-changing market situations. Considering that formation of land and development of infrastructure and ancillary facilities take time, and that there may be delays arising from unforeseeable circumstances, our land reserve needs to comprise land from diversified and multiple sources. Only with that could we be confident with ensuring a steady supply.

This is why we have been emphasising that the development of the Northern Metropolis (NM) and the reclamation proposals of the Kau Yi Chau Artificial Islands (KYCAI) must proceed at full speed. Of the 7 300 ha of overall land supply mentioned above, over half would come from these two strategic growth areas, with over 3 000 ha from the NM and 1 000 ha from the KYCAI.

These two strategic growth areas, while both contributing significantly to Hong Kong's land supply in the next 25 years, have different foci and strategic goals.

The NM supports Hong Kong in establishing a new industry pattern of “South-North dual engine (finance-innovation and technology)” and accelerates the development of Hong Kong into an international innovation and technology (I&T) centre, thereby promoting the development of new industrialisation and facilitating cooperation and synergy with our sister cities in the Greater Bay Area. As announced in the Budget Speech last year, a dedicated fund of $100 billion has been set aside to expedite the implementation of land, housing and transport infrastructure works within the NM. The Development Bureau is pressing ahead with the establishment of the Northern Metropolis Co-ordination Office, and will formulate an action agenda and implementation plan of the NM within this year. The Office for Attracting Strategic Enterprises is also proactively reaching out to attract strategic enterprises to tie in with the industrial pattern in the NM. The Government will shortly commence consultation on the development proposals and land use planning of San Tan Technopole, a flagship project in the region, with a view to commencing site formation works for the first batch of I&T sites in 2024. In addition, it is expected that the NM will provide more than 500 000 new flats and more quality living space for members of the public. All in all, the NM development will play a very important strategic role in the overall economic and social development of Hong Kong.

There are three key positions for the KYCAI reclamation project: first, it will become a major source of residential land supply, providing about 200 000 residential flats to accommodate a population of 500 000 to 550 000; second, it will be developed into a third Core Business District in Hong Kong, providing a total of about 5 million square metres of commercial floor area; third, it will connect Hong Kong Island, Lantau Island, the Hong Kong International Airport, the Hong Kong-Zhuhai-Macao Bridge Port and the New Territories West, and further link to the future railway to Qianhai, Shenzhen. The railway would provide members of the public with a more convenient and accessible transport network, which facilitates their commuting as well as economic activities. Upon full development of the KYCAI, the associated economic activities are anticipated to bring around HK$200 billion of value added to Hong Kong annually, amounting to about 7% of our gross domestic product.

The development of artificial islands of 1 000 hectares is not only related to the economy and people's livelihood; it also seeks to build a more convenient transport infrastructure network, thus shortening the commuting time between home and school/office, and greatly facilitating work, study and life. On a ballpark basis, land sales revenue from the private residential and commercial sites created from reclamation under the project would amount to about $750 billion. The land sales revenue alone has surpassed the construction cost; this has not yet taken into account the economic benefits mentioned in the previous paragraph and from the development enabled by more convenient transport along the transport infrastructure and in other areas. In addition, in light of aging buildings in the urban areas, we need more decanting space so that urban renewal can be expedited.

Indeed, the community has different opinions on this project. Nearly 8 000 pieces of public submissions had been received in the recently completed public engagement activities, among which about 60% expressed support to the project. The major concerns of those holding a different view were largely about the progress of the project, impact on the environment, etc. The Government will take into consideration the views received and strive to make good overall planning for the project. For concerns about the impact of the entire project on public finance, I would like to point out that there are good conditions for this project to raise funds from the market, and a relatively large portion of the funds required would be raised through the market. As a matter of fact, many enterprises and institutions have also acknowledged the development potential of the project, and have expressed interest in taking part in it. The proposals include structured financing or public-private partnership models to allow greater flexibility and wider choices for financing the project. In addition, we could also issue bonds with a retail component. By doing so, we can allow members of the public to share stable and sound investment returns while financing the project.

Reclamation is an effective means to provide sizeable land to Hong Kong. As a matter of fact, with our hilly terrain, reclamation has always been a major source of land creation in Hong Kong, with over 70% of our city's population living in new towns created from reclamation. The pace of reclamation has however significantly slowed down since 1997. At present, the amount of reclaimed land only accounts for 7% of Hong Kong's total land area, far lower than the 20% in Singapore. The continued shortage of land carries profound impact. The median per capita floor of accommodation in Hong Kong is only 170 square feet, one-third lower than Shanghai and Singapore, and 40% lower than Shenzhen. There is an imminent need for Hong Kong to boost land supply through reclamation and other land development initiatives.

All in all, it is necessary for us to take forward both the NM and KYCAI projects. This will not only help diversify our land supply sources; both developments will complement each other and help address any time gaps in land delivery that may arise from different projects in progress. We must continue to create land through a multi-pronged approach, so as to make available a more spacious and better living environment for the people of Hong Kong.

If we want more vibrant and stronger economic growth, we must overcome bottlenecks on various fronts such as talent, workforce and land. Only by better developing Hong Kong's economy and infrastructure, and enabling our people to have higher incomes and a better living environment, could their aspirations for a better life come true. As Hong Kong progresses from good governance to prosperity in a new era, this will be our key deliverable.

May 14, 2023

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