Government measures to cool the property market by increasing land supply are starting to bite, with construction starts on new flats reaching the highest level since 2004 even as fewer people are taking out mortgages for new flats.
Statistics from the Transport and Housing Bureau showed construction work on 8,000 flats started in the first quarter, the highest level since research began in 2004. It was also more than double the 3,500 flats recorded in the fourth quarter of last year.
"This will dampen buying interest in the short run. Home-seekers would postpone buying plans as they will expect property prices to drop when the new housing supply increases significantly," said Chau Kwong-wing, a professor at the department of real estate and construction at the University of Hong Kong.
Including the unsold units in completed projects, units under construction and units cleared by the Buildings Department, an estimated 72,000 flats will be available for sale in the next three to four years.
"Unsold units in completed projects have risen to 6,000. That won't affect the prices of second-hand flats for now. But once the number crosses 10,000, it will affect land prices in the New Territories," said Wong Leung-sing, an associate director of research at Centaline Property Agency.
In the long term, Chau said any price movement would depend on whether the government was able to replenish developers' land bank and flats under construction would stay at the current level.
"That's not because the government has more sites for sale. It's because it has sped up land sales. It is now having difficulty rezoning sites for residential use. If it is unable to replenish the land bank, it will be difficult to maintain the current high levels of housing and land supply, and property prices won't drop," Chau said.
Meanwhile, the Hong Kong Monetary Authority announced yesterday mortgage loans approved in March grew 23.7 per cent from February to HK$19.3 billion. But mortgage financing of new flats fell 2.3 per cent to HK$5.7 billion.
The number of home loans currently in negative equity rose from 26 in the fourth quarter to 81 in the first quarter.