Floor space per person and housing development: An urban growth approach to estimate housing supply in Hong Kong

This article estimates an empirical model of new housing supply in Hong Kong based on the urban growth approach. The article introduces a new factor, space usage per person (SPP), to this model reflecting the quality of housing, the demand and supply aspects of the housing market, along with prices and other standard variables. SPP may also be used as a human settlement development indicator. Empirical results provide strong evidence that the introduced new factor exerts a strong positive influence on new housing supply, and that even a marginal change in the space usage pattern would have a great impact on housing supply. This suggests that non-price measures too should receive priority when estimating future housing development needs. Empirical estimates also suggest that a 10 per cent rise in real house prices leads to a 0.6 per cent increase in new housing starts and twofold rise in real house prices would increase the entire housing stock by 6 per cent.