Price pressure sets to ease as new homes are completed

HONG KONG: The shortage of flats may be easing, a positive sign for those seeking to buy into the city's increasingly red-hot property market.

Construction of 4,100 new flats started in the first three months of the year, equivalent to half the total number of new flat starts last year. Construction began on 8,000 flats in 2008 and 8,200 last year.

The Transport and Housing Bureau data also show the number of new flats started in the first quarter is 32 per cent higher than the 1,700 units started in the last quarter of 2009.

A total of 4,900 new flats were completed in the first quarter - 206 per cent more than a year ago and equivalent to about 67 per cent of the number of new flats completed in 2009.

Property agents said the increase in completed flats was due to four large-scale housing estates being completed, including Le Prestige in Tseung Kwan O, Phase One of Festival City in Tai Wai, Emerald Green in Yuen Long, and Primrose Hill in Tsuen Wan.

Centaline Property Agency's research shows at least four major projects including Yoho Midtown in Yuen Long, Le Prime in Tseung Kwan O, phase two of Festival City, and The Latitude in San Po Kong offering a total of 5,833 units will be completed by the end of this year.

Wong Leung-shing, an associate director of research at Centaline Property Agency, estimates about 15,691 units will be completed this year, 119 per cent more than the 7,157 flats last year. This will be the highest in four years and return completions to average supply levels.

"The new supply will be in line with average annual property sales of 14,900 new flats over the last five years. That means supply and demand for new homes will be in balance once again," he said.

According to the Hong Kong Property Review 2010 released by the Rating and Valuation Department on April 23, there were 47,347 units vacant at the end of last year, compared with 52,938 vacant flats a year earlier. The drop in the vacancy rate to 4.3 per cent from 4.9 per cent a year ago, showed demand was increasing.

Wong said he believed that property prices would now stabilise as the government was increasing the future supply of flats by releasing more residential sites for sale. He expects construction will start on about 15,000 units this year and in 2011. Economist Kwan Cheuk-chiu said the strong rebound in completed units this year will ease the upward pressure in property prices.

"The government expects the new supply of residential property will reach about 50,000 flats over the next three years and that is sufficient to meet demand for housing," he said. "Average property sales have been about 19,000 units a year over the last ten years. Land supply is increasing. The new supply of flats is increasing. Property prices will not have substantial growth over next few years."-- South China Morning Post