Shortfall in construction of new flats 'will curb fall in property prices'

Hong Kong's property market continues to experience a shortage of new supply, with the number of completed flats falling to a four-year low last year, but analysts expect supply to pick up in coming years.

Figures from the quarterly report of the Housing Authority show that only 8,300 new private residential units were completed last year - nearly 18 per cent less than 2012. The number also fell far short of the government's expectation of 13,551 flats for 2013.

Property prices were expected to fall this year following the introduction of the government's cooling measures in February last year. But analysts believe any reductions in 2014 will now be limited by the shortfall in the construction of new flats.

"The shortfall occurred because government land sales rely on the land application list under which developers' expression of interest for land parcels leads to land auction," said Patrick Chow Moon-kit, head of research at real estate agency Ricacorp Properties.

"As developers were reluctant to buy three or four years ago, and there is usually a lag of three to four years between land purchase and flat sales, we have a shortfall."

But he added: "We should be aware that new housing supply will increase significantly in the coming three years. Some 15,000 to 16,000 flats are to be completed each year. The substantial increase in supply will put downward pressure on property prices. Owners of second-hand flats will need to cut their asking prices."