In recent months, the property desk has been flooded with faxes from agents and developers advertising opportunities to 'pick up your dream home at a price you can afford'. With residential property having fallen 30-50 per cent in the past year - prices peaked about the end of May last year and have been sliding since - there seems to be an opportunity to fulfil your dreams of upgrading to that 1,000-square-foot-plus home. 'For people who have yet to enter the private residential market, this is going to be the best opportunity you're ever going to get,' one agent said. However, analysis of the facts shows a different picture. Property watchers unanimously say private housing units in Hong Kong are heading back towards almost affordable, given income levels hold steady and there is no massive increase in unemployment. Government and private developers are betting pent-up demand from formation of households - about 6 per cent per year according to census figures - will begin taking up the slack. The fact is, mobility of households through the housing stock always has been the basic theory ruling Hong Kong's housing - and economic - equation. Cynics say the Government has a vested interest in seeing households graduate from public rental housing to home-ownership scheme flats and on into the private market, because it then can enjoy the fiscal benefits from its unwritten, but tacitly understood, high land-price policy. For private-sector developers, the advantage is a built-in audience, eager to lap up their product whatever the price and quality. Census figures point to the creation of 80,000 extra households needing housing per year. Assuming most are younger and in the lower-income range, these households as a group should be close to the 1996 median household income figure of about $17,000 per month. That would put most of them into the market segment for public housing, the first rung of the housing ladder, rather than private units. Centaline Property Agency managing director Shih Wing-ching said there could be no first-time entry into the market unless the stock of flats increased. Last year, 30,000 new private flats had been built, Mr Shih said. Figures show supply of public rental and publicly subsidised home ownership flats was similar to that for private flats. Public rental flats are almost free to needy households, yet individual unit spaces - about 400 square feet on average - approach the size of private housing, of which the average size in Hong Kong is 480 sq ft. To make room for most new private-sector home-owners, existing owners must either move back into public housing - unlikely - or up the housing ladder into a bigger and better unit. Surprisingly, this also appears unlikely in the current market. There are about 900,000 private residential units in the housing stock, making the growth in new stock per year almost inconsequential. And the fact of the matter is that while income has increased significantly over the past decade, flat quality - in terms of average size - has not kept pace. In 1986, median household income was about $4,000 per month. Yet, according to the Rating and Valuation Department, the housing stock was over 600,000 units. Income increased four-fold in the past decade but the amount of private housing increased only 50 per cent. Furthermore, while one would expect a noticeable increase in the size of the average flat to mirror society's increased wealth, rating department figures indicate the distribution of flat sizes has remained almost constant. Class A and B flats - those smaller than 700 sq ft - still make up about 80 per cent of the housing stock. Meanwhile, the proportion of flats larger than 1,000 sq ft also has hardly changed, still making up only about 6 per cent. Clearly, there is something amiss with the all-powerful Hong Kong property paradigm. University of Hong Kong economics professor and executive director of the Centre for Economic Research, Alan Siu, said a fundamental problem of the housing market was the unavailability of housing for Hong Kong's increasingly wealthy households to take up. He suggested this unmet demand and aspirations for better housing helped fuel the boom in luxury unit prices. 'It is a fact that prices of luxury housing have risen faster and higher than the prices of small flats on average over the past decade,' Professor Siu said. The fundamental dynamic of inflation in the residential property market had been that of a large and growing demand chasing a fixed and comparatively small supply, he said. If we accept that this is true, the conclusion to be drawn is that the trading-up process is not sustainable. What would you trade up to? According to the figures, it would be just more of the same. And, despite the assurances of realtors, it does not make any more sense even under this deflationary regime, brought about by the onslaught of the Asian economic crisis. Housing prices may have fallen 40 per cent, but so has the flat the would-be upgrader has. While further corrections could not be ruled out, job insecurity and prospects for lower salary increases further dampened desire to buy or trade up, analysts said.