The slower private-sector housing starts last year were indicative of continuing worries about an oversupply.
Government data shows developers were issued consent to begin work on 19,254 flats in the first nine months, down 22 per cent from the 24,728 starts a year earlier.
Analysts said preliminary figures for the fourth quarter indicated a surge in housing starts involving several thousand units, and this might narrow the overall year's slowdown rate.
Fewer housing starts had been expected following a sharp drop in land sales and premium settlements for redevelopment projects.
Analysts said the abundant supply of flats under construction meant developers were cautious about replenishing land banks.
The Government's policy of putting more sites on the application list also effectively cut land supply and, as a consequence, new construction.
In 2000, developers received consent to start work on 31,366 flats, a 29.2 per cent decline from the 44,323 units recorded for 1999. By comparison, there were 33,843 private-housing starts in 1998, 40,962 in 1997 and 22,113 in 1996.
The trend towards building small residential flats continues, as developers move to meet demand from price-sensitive buyers and those with smaller budgets.
More than 70 per cent of units in last year's private-housing projects granted permits to begin work came under the category of smallest unit size - below 430 square feet in saleable area.
According to the Hong Kong Monthly Digest of Statistics, 13,837 units in the smallest category were approved in the first nine months of last year, representing 71.9 per cent of total approvals.
It compared with the 74.8 per cent for the whole of 2000, 60.9 per cent in 1999, 56.8 per cent for 1998, 55.7 per cent for 1997 and 33.9 per cent for 1996.
Analysts indicated demand for smaller flats looked more positive, with the Government boosting loan schemes to encourage first-home buyers to enter the market. Developers found it made more sense to build lower-end flats.
One example is on sale at present - Henderson Land Development's Metro Harbour View in Tai Kok Tsui.
Its smallest units have a saleable area of only 328 sq ft, excluding bay windows. The quoted gross floor area is 477 sq ft. The cheapest unit at the initial launch last month was priced at HK$1.23 million, a level seen as affordable for many first-time buyers.
In the first nine months of last year, private-housing starts for units with a saleable area of between 430 sq ft and 752 sq ft reached 4,267. They accounted for 22.2 per cent of the total.
There were 452 starts on units measuring 753 sq ft to 1,075 sq ft and 95 starts for units of 1,076 sq ft to 1,721 sq ft. For units measuring 1,722 sq ft and above, the period saw 603 starts.