Page 67 - LH_Research_Report_2020_Eng

We believe that the LTHS has grossly underestimated our future
housing demand. In the LTHS, the main component of housing
demand is household formation, which was forecasted unreasonably
low due to a problematic methodology that was adopted.

The Government has updated its rolling ten-year housing supply target in the
latest LTHS Annual Progress Report 2019. The total housing supply targeted for
the next ten years will be 430,000 units. The figure is 50,000 units down compared
to the target announced in 2014. After examining the six respective components
that formed the supply target projection, it is found that the reduction in target
is mainly driven by a 73,000-unit downward revision in the net increase in the
number of households (i.e. household formation) in the same period.
In coming to its ten-year supply target, the LTHS relies on the C&SD’s forecast of
household growth. The Department has three steps in estimating the household
formation, which are: (i) forecasting the population; (ii) using past trends of
average household size to estimate future average household size; (iii) dividing the
projected population over the average household size to arrive at the number of
households in the future.

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