NEARLY 70 per cent of the first phase of Dream Lake Villas located in the tourist spot of Hangzhou, south-east China, have sold since it was put on the market in late November. Dream Lake Villas is a large scale residential project by Hangzhou Golden Horse Real Estate Co. It is the second residential development in Hangzhou to be put on the Hongkong market. It is situated in the Zhijiang resort area, about 10 minutes drive from the scenic spot of Xi Hu. The sole agent of Dream Lake Villas said the development was a rare one for the area. ''Land acquisition is not easy around the area because the government wants to protect the beautiful scenery,'' the assistant account manager of China Land Property (Hongkong), Ms Connie Lam-kwan said. The rarity of the development, which cost $1.14 billion, together with the mild climate, scenic beauty and booming tourist industry in Hangzhou, would push up the price of the development she said. Occupying a total area of 470,000 square metres, Dream Lake Villas consists of 530 bungalows and is to be completed and sold in five phases before the end of 1994. The first phase has about 100 units. There are seven types of designs for the bungalows, which range in size from about 3,000 square feet to 6,000 sq ft. The average price is $790 per sq ft. Ms Lam said potential buyers were businessmen who have to travel to nearby commercial centres, retired people and those who would like to purchase a bungalow in Hangzhou as a resort house. As there was an increasing number of overseas enterprises in Hangzhou, the municipal government had hastened the construction of infrastructural facilities, including airport and railway, she said. These facilities, together with other investment incentives provided by the municipal government, would contribute to a prospective real estate boom in Hangzhou, according to Ms Lam. Meanwhile, the third residential development in Hangzhou, called Lillac Villa, will be put on the market this month by Lydeny Development. Director of Lydeny Development, Ms Sandra Wong Shun-yi, said it was a good time to invest in Hangzhou as property in southern China was experiencing a slow down. ''Property values in Hangzhou, where the real estate is just beginning to develop, will rise because demand still exceeds supply,'' Ms Wong said.