Construction of private residential flats in Hong Kong slumped in the past two quarters, with the building of only 1,700 units starting in the first three months of the year.
The latest figures from the Transport and Housing Bureau show the number of flats being built in the first quarter was 19 per cent fewer than the 2,100 units in the last quarter of last year and 65 per cent fewer than the 4,800 units in the third quarter.
At the end of last month, about 54,000 flats were available for sale, the same as three months ago. Including the 8,000 units on which work is yet to start, new residential supply expected in the next five years has dropped to 62,000 units, the lowest since records began in 2004.
About 1,600 flats were completed in the first quarter, an increase of 60 per cent from the 1,000 units in the previous quarter.
According to a Rating and Valuation Department market review released yesterday, 8,780 flats were completed last year, of which 52 per cent were in the New Territories.
The government expects 14,740 units will be completed this year, 68 per cent more than last year. About 76 per cent of the flats will be in the New Territories.
Next year, about 12,600 units will be completed, with 64 per cent coming from the New Territories.
Although new supply will increase in the next two years, it is far below the levels of 2004 to 2006. During the three years, new supply ranged between 16,580 and 26,040 flats a year.
In the luxury residential market, 2,390 flats will be completed this year, 103 per cent more than last year. Only 12 per cent of the new supply will come from the luxury districts on Hong Kong Island.
However, new supply is expected to fall 32 per cent to 1,620 flats next year. Half of the units will come from Island South.
Prices of luxury flats fell 12 per cent last year. As rents lag sales prices, the rental index for the fourth quarter shows a 3 per cent growth compared with a year earlier.
The vacancy rate rose to 8.8 per cent at the end of last year from 8.4 per cent in the previous year. But that is still lower than the 10.4 per cent in 2004 and 9.9 per cent in 2005.
Eric Yuen, an analyst at Guoco Capital, expects property prices will be flat this year. Despite the rising unemployment rate and the economic downturn, interest rates and new supply had stayed at record lows, he said.
'Also, developers and most individual owners have not cut asking prices significantly as their holding powers are strong,' Mr Yuen said. 'Investors could enjoy a rental yield of at least 4 per cent. I don't think property prices will drop sharply this year.'
Wong Leung-shing, an associate director for research at Centaline Property Agency, said it was expected only 12,400 units would be completed each year in the next five years.
'This means new supply will stay at low levels in the next few years and underscores the negative impact of the global financial crisis,' Mr Wong said.
Property prices dropped 60 per cent in 1998 during the Asian financial crisis compared with a slide of 25 per cent after the global financial crisis erupted in September last year, he said.
Cheung Kong (Holdings) executive director Justin Chiu Kwok-hung yesterday said the overall supply of private housing would remain stable despite the start of construction on only 1,700 flats in the first quarter.
The company will sell 4,000 units a year, in line with its past strategy.