"With so many new developments in the Kai Tak area, could there be an oversupply? Would entering the market now mean I'm just handing over the baton?" Last month, after visiting a show flat of a project in Kai Tak, prospective buyer Michael anxiously asked me this question. He had 4 million for a down payment and originally planned to take advantage of the developer's 'immediate purchase discount' to enter the market. But seeing plot after plot being launched in the area, he began to worry that he might be buying at too high a price, and even feared that future property prices could drop due to an oversupply.
This concern is believed to be a common sentiment among many prospective homebuyers or investors. As one of the largest urban redevelopment projects in Hong Kong in recent years, Kai Tak will indeed have a large supply of new flats in the next five years. But does 'high supply' necessarily mean 'oversupply'? The answer to this question is far more complex than it appears on the surface. In today's article, I will use data, planning blueprints, and market analysis to take you through the intricacies of the supply situation in Kai Tak, helping you make more informed property decisions.
Kai Tak Supply Overview: The Truth Behind the Numbers
Analysis of Actual Supply in the Next 5 Years
According to the latest data released by the Urban Renewal Authority and the government, the Kai Tak Development Area is expected to complete approximately 12,000 to 15,000 private residential units in the next five years. This number is indeed astonishing at first glance, but we must understand it within a broader context.
First of all, these 15,000 units are not being launched to the market all at once. In fact, these supplies will be distributed across different locations, different developers, and different time points for sale. Taking 2024-2025 as an example, it is expected that only about 3,000-4,000 units will be completed, which amounts to roughly 2,000 units per year. This figure is actually comparable to the annual supply in established new districts like Kowloon Station and Tseung Kwan O.
:::tip Expert Opinion Supply should be judged by 'absorption rate' rather than 'absolute numbers.' As a rare large-scale development area in the urban district, Kai Tak's absorption capacity far exceeds that of the typical new towns in the New Territories. :::
Comparison with Supply in Other New Districts
Let's make a horizontal comparison. In new development areas in the northern New Territories, such as Hung Shui Kiu and Kwu Tung North, it is expected that over 60,000 units will be supplied in the next 10 years, but the facilities, transportation, and employment opportunities in these areas are far inferior to Kai Tak. In contrast, Kai Tak is located in the heart of Kowloon, 5 minutes to Kwun Tong and 10 minutes to Tsim Sha Tsui. This geographical advantage is unmatched by the new areas in the New Territories.
Looking at historical data, Tseung Kwan O also experienced a period of abundant supply between 2000 and 2010, during which there were concerns about 'oversupply' in the market. However, it has been proven that as long as supporting facilities are in place and transportation is convenient, the market's absorption capacity far exceeds expectations. Over the past 15 years, property prices in Tseung Kwan O have risen by more than 150%, proving that 'more supply' does not equal 'falling prices'.
Government Planning and Support Timeline
The supply at Kai Tak is not a 'blind construction of buildings,' but is in line with a comprehensive planning blueprint. The following is the completion schedule of key supporting facilities:
- 2024-2025: Full opening of Kai Tak Sports Park and opening of Kai Tak Station Shopping Mall
- 2025-2026: The first phase of Kai Tak Hospital begins operation, and the expansion of Kai Tak Cruise Terminal is completed
- 2026-2027: Kai Tak Station Plaza completed, pedestrian bridge network connecting Kwun Tong and Kowloon Bay completed
- 2027-2028: Kai Tak Metropolis Park Phase II opens, local school network becomes complete
As these supporting facilities are gradually completed, they will continue to enhance the residential appeal of Kai Tak, creating a positive cycle of 'increased supply and simultaneous improvement of supporting facilities'.
Demand Analysis: Who is buying Kai Tak?
Target Audience Profile
Based on my observations over the past few years, the buyers in Kai Tak can be mainly divided into three categories:
1. Kowloon district home switchers (accounting for about 40%) These buyers originally lived in older districts such as Kwun Tong, Kowloon Bay, and Wong Tai Sin, holding 3 to 5 million in funds, hoping to move into newer and larger units. For them, Kai Tak is the best choice to 'not have to leave their familiar community.'
2. First-time car buyers (accounting for about 35%) Young families or couples, with a budget of 5 to 7 million, value the amenities and appreciation potential of new developments in Kai Tak. Compared to new properties in the New Territories at the same price, they are more willing to choose new developments in the city.
3. Investment rental tenants (accounting for about 25%) Professional investors focus on the rental demand in Kai Tak. The large number of new office buildings in the area, the Kai Tak Sports Park, the cruise terminal, and other facilities will bring a stable source of tenants. Currently, the rental yield of new properties in Kai Tak is about 2.5-3%, which is at an above-average level among new properties in the urban area.
:::highlight Insider Tip The tenants in Kai Tak generally have higher quality, many of whom are professionals working in the Kwun Tong commercial area. The rental stability is strong, and the default rate is low. :::
Population Inflow Trends
According to data from the Planning Department, the Kai Tak Development Area is expected to ultimately accommodate about 50,000 people. Currently, the population in the area is about 15,000, leaving a significant room for growth. More importantly, employment opportunities in Kai Tak are growing simultaneously:
- Kai Tak Sports Park is expected to create 5,000 jobs
- Kai Tak Business District (including office buildings and retail) is expected to provide 15,000 jobs
- Kai Tak Hospital and related medical facilities are expected to hire 3,000 people.
These employment opportunities will attract a large influx of people, forming an ideal community model of 'work-life balance.' As the working population in the area increases, the demand for housing naturally rises, which is a key factor supporting property prices.
Mortgage Policies and Purchasing Power
2024 After the government relaxed the mortgage loan-to-value ratio this year, properties below 10 million can have a maximum mortgage of 90%, greatly lowering the threshold for first-time buyers. For example, a two-bedroom unit in Kai Tak priced at 6 million would only require a down payment of 600,000, with a monthly repayment of about 20,000. For a dual-income family with a monthly income of 50,000, the appeal of "repaying mortgage cheaper than renting" is very obvious.
Currently, the rent for similar units in the Kai Tak area is about 18,000-20,000 HKD. The monthly mortgage for buying a property to live in is similar to the rent, but it comes with the security of owning property and potential for appreciation. This advantage of 'paying less than rent' is an important driver for first-time homebuyers.
Oversupply Risk Assessment: Three Key Indicators
Indicator 1: Vacancy Rate and Absorption Speed
The most direct indicators to judge whether supply is excessive are the 'vacancy rate' and 'sales velocity.' Currently, the newly completed properties in Kai Tak have an average vacancy rate of about 5-8%, which is considered a healthy level (generally considered healthy if below 10%).
Take several new Kai Tak developments launched in 2023 as examples:
- AIRSIDE: The first 300 units, 85% sold within 3 months
- Kai Tak No.1: The first batch of 200 units, 90% sold within 2 months
- Huanran Yiju: The first batch of 150 units sold 80% within 1.5 months
These data show that market demand for the new Kai Tak estate remains strong, and the absorption rate far exceeds the situation of 'oversupply'.
:::warning Precautions If more than 30% of units remain unsold six months after the launch of a new development, this is a warning sign of oversupply. Such a situation has not yet occurred in Kai Tak. :::
Indicator 2: Rent Trends and Leasing Market
Rent is the best indicator of actual demand. Over the past three years, rents for new Kai Tak properties have continued to rise, with an average increase of about 15-20%. For example, a 400-square-foot two-bedroom unit:
- 2021: Rent is about 15,000 yuan
- 2023: Rent is about 18,000 yuan
- 2024: Rent is approximately 18,500-19,000 yuan
Rising rents indicate an increase in actual housing demand, which is completely opposite to a situation of 'oversupply.' If there were truly an oversupply, rents should be falling or stagnating.
Indicator 3: Second-hand Transactions and Negotiation Space
The activity level and bargaining room in the second-hand market can also reflect supply pressure. Currently, the bargaining room for used units in Kai Tak is about 3-5%, which is at a normal level. If there is an oversupply, the bargaining room usually expands to 8-10% or even higher.
2024 In the first quarter of the year, the number of second-hand transactions in Kai Tak rose by 20% year-on-year, and the average transaction price was about 4% lower than the asking price. These data indicate that although buyers have bargaining power, it is not an extreme 'buyer’s market' situation, and the market is still in a state of supply-demand balance.
Investment Strategy: How to Seize Opportunities in the Kai Tak Supply Wave
Three Major Principles of Stock Selection
If you decide to buy property in Kai Tak, the following three principles can help you choose a "good deal".
1. Prioritize projects near MTR stations The properties around Kai Tak Station and Sung Wong Toi Station have higher long-term appreciation potential. Units within a 5-minute walk to the MTR station have a premium in both rent and property price.
2. Pay attention to the background of the developer and the quality of management Projects by large developers usually have more complete management and supporting facilities, and tend to retain their value better. Details such as clubhouse facilities, property management, and maintenance will all affect long-term property prices.
3. Avoid 'isolated island holdings' Kai Tak covers a wide area, and some locations are relatively remote with incomplete facilities. When choosing, pay attention to whether there are shopping malls, schools, and transportation facilities nearby to avoid buying an 'isolated property'.
:::success Practical Advice If the budget is limited, you can consider a 'rent first, buy later' strategy: first rent a property in Kai Tak, observe the area's development and property price trends, and enter the market after the facilities are more complete and the peak supply period has passed, which carries lower risk. :::
Timing the Market Entry
Kai Tak's supply will peak in the next 2-3 years, during which there will indeed be more options and room for negotiation. However, a 'supply peak' does not equal the 'best time to enter the market,' because:
- Developers will offer more promotions during peak supply periods (such as immediate purchase discounts and cash rebates).
- But after the supporting facilities are improved, housing prices usually experience a rise.
- Entering the market too early may require waiting for supporting facilities, while entering too late may miss the affordable prices.
My suggestion is: 2024-2025 is a better window for entering the market. During this period, supply is sufficient, there are many choices, and there is considerable room for negotiation, but the main facilities (such as the sports park and shopping malls) have already been gradually completed, so you won't have to wait long to enjoy the complete amenities.
Risk Management and Exit Mechanism
Investing in Kai Tak real estate also requires good risk management:
Short-term Risks (1-2 Years):
- A brief adjustment in property prices (about 5-10%) may occur during peak supply periods
- Developers' price reduction promotions may affect second-hand property prices
- Response strategy: Avoid short-term trading, hold for at least 3-5 years
Medium-term Risks (3-5 Years):
- If the economy declines, rental demand may decrease.
- Rising mortgage interest rates will increase the pressure of paying for a home
- Coping method: Set aside at least 6 months of mortgage reserves and choose units with higher rental returns.
Long-term Opportunities (Over 5 Years):
- After the complete development of Kai Tak's supporting facilities, housing prices are expected to rise steadily.
- Urban land supply is limited, and the scarcity of Kai Tak will gradually become apparent.
- Strategy: Hold long-term to enjoy capital appreciation and rental income
Summary: View the Kai Tak supply rationally and seize the opportunity to buy in the urban area
Returning to Michael's question at the beginning of the article: Will Kai Tak have an oversupply in the next 5 years? The answer is: the supply is indeed sufficient, but it is far from being "excessive".
The key lies in three points:
- Supply Dispersion: 15,000 units launched over 5 years, with an average annual supply at a normal level
- Strong Demand: Urban locations, complete facilities, and a balance between work and residence, making them far more attractive than the New Territories new towns.
- Supporting Synchronization: The government has well-planned developments, with supporting facilities being completed successively, underpinning long-term property prices.
For those preparing to buy their first home, Kai Tak is a rare opportunity to enter the market in the urban area. Although there may be room for negotiation in the short term due to sufficient supply, in the long run, land supply in the urban area is limited, and the scarcity of Kai Tak will gradually become evident. The advantages of 'affordable for purchase compared to rent,' complete facilities, and convenient transportation are all solid foundations supporting property prices in Kai Tak.
Of course, buying property is always a major life decision and cannot be decided based on just one article. My advice is: do plenty of research, visit the locations in person, calculate your financial budget carefully, and consult professional opinions. The supply surge in Kai Tak is both a challenge and an opportunity; the key lies in whether you can analyze it rationally and seize the timing.
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