Wheelock Properties, the biggest landlord in Tseung Kwan O, said there is little room for housing prices to drop because of high construction costs.
"Construction is now more expensive than land. This is unprecedented," said vice-chairman Stewart Leung Chi-kin.
He said construction costs, both in terms of human resources and materials, had increased 50 per cent in the past few years.
In July, Wheelock bought a seaside plot in Tseung Kwan O for HK$3.67 billion, or HK$4,288 per square feet, 6 to 13 per cent lower than the prices at which seaside lots were sold last year. It planned to invest HK$8 million in a residential project on the site that would include high-rise apartment buildings and sea-view detached houses.
Leung said the area was well equipped and densely populated, and had great potential to become the next central business district after Central and Admiralty. But he added that the government needed to find a way out for the environmental problems caused by the landfill site in southeast Tseung Kwan O.
The company has bought four plots in the satellite town totalling 2.34 million sqft for HK$9.9 billion since last year. The first project is expected to be launched next year, with prices of more than HK$10,000 per square foot.
Although Leung sounded confident, sales of first-hand residential properties have been hit by the new ordinance in April aimed at shielding buyers from dishonest practices.
Research by Centaline Property Agency in July said the inventory level of residential properties, or the ratio of unsold units, stood at 14.6 per cent - the highest in nine years.
To clear its 15 remaining units, Hongkong Land offered a 5 per cent discount for the Serenade project in Tai Hang last month. From Tuesday, Kerry Properties will sell the last 35 flats at its Lions Rise project in Wong Tai Sin at discounts of up to 9 per cent.