Rise in land supply won't drag prices down

PUBLISHED : Wednesday, 01 June, 2011, 12:00am
UPDATED : Wednesday, 01 June, 2011, 12:00am


There is no evidence that small flats are becoming more affordable, despite the release of more sites earmarked for their construction, property analysts said.

The government has released some sites with size restrictions attached and plans to release more in the current financial year to increase the supply of small and medium-sized flats and curb the rapid rise in prices for them.

In March, Cheung Kong (Holdings) won a tender for the first site with restrictions placed on the number and sizes of flats that it could develop.

The developer paid HK$2.41 billion or HK$3,629 per square foot for the Yuen Long site, and surveyors estimated the average selling price would have to reach at least HK$5,000 per square foot to generate a reasonable profit.

That in turn implied an entry-level selling price for the flats of at least HK$3 million, which would make them too expensive for most first-time buyers.

Charles Chan Chiu-kwok, managing director at Savills Valuation and Professional Services, said prices for such sites in urban areas would not fall, even though the government planned to release more sites with restrictions on flat sizes and numbers.

He said the government was reducing the sites' plot ratios - the floor area of buildings erected on them - and housing supply was therefore unlikely to increase significantly. That was an inducement to developers to continue buying such sites, he said.

'It may have provided more affordable housing if the sites were located in the New Territories. However, as property prices in urban areas continue to rise, this will boost the prices of properties in the New Territories,' he warned.