OFFICE developers are seizing the chance to build on land intended for new homes, it has been claimed. The Government's controversial mortgage ceiling is one of the reasons for the trend as demand to buy homes stays down. People are reluctant to buy because of the 70 per cent restriction on home loans, according to a new property report. In many cases, commercial rents in peripheral and secondary areas have caught up - and sometimes overtaken - their residential counterparts. And with office loans often at a similar level, developers are taking advantage of the limited supply available. The report by A. G. Wilkinson & Associates says developers are focusing on buying up and changing residential plots. Lower class hotels are also under pressure as the demand for commercial space grows. The firm's assistant director, Mr Michael McGuire, said there was no longer a big gap in the rates of pre-selling residential and commercial projects. ''The mortgage lending ceiling has meant people are waiting for it to be relaxed before they make a purchase,'' he said. ''There is less of a disadvantage in erecting commercial buildings or having commercial elements inside buildings because there is a more equal compatibility in pre-selling. ''There has also been a gradual equalisation of values of secondary and peripheral offices and residential units in the same area. ''It, therefore, makes sense to put up commercial office space.'' The firm's latest quarterly property review said residential areas were being sacrificed for commercial use. Developers were focusing on commercial demand because of the slump in the mass residential market. The report said ''practically any'' land zoned to permit residential or commercial development was being taken up wholly for the latter. Apart from the Sun Shing Street site in Shau Kei Wan auctioned by the Government last year, many lower profile projects reinforced this trend. All possible grounds for converting site uses are also being pursued in applications to the Town Planning Board. Even in secondary locations developers are using the full complement of commercial space in sites permitting both schemes. The report said offices were being formed in towers with ground floor shops and residential accommodation above. The hotel sector has also suffered from the resurgence in the commercial market. Three-star hotels, such as the former Fuji and San Diego hotels in Kowloon, have fallen victim to the expanding commercial districts. The land squeeze has also meant the end for the Grand and Empress hotels in Tsim Sha Tsui and the Lee Garden Hotel in Causeway Bay. According to Land Registry data, the number of residential sales and purchase agreements dropped by more than 40 per cent in January compared to December 1992. As well as the 70 per cent ceiling, the uncertainty of Sino-British relations had made many people reluctant to buy. Analysts believe the ceiling will stay for some time because the prospect of an improvement in relations could boost the market and force prices up again. A. G. Wilkinson believed prices would stabilise as more people moved back into the market in the first quarter of 1992. The report added that prices - which had dropped about 15 per cent from their peak - would slump by the same amount again if the ceiling remained in place. ''On the other hand, should banks lift current mortgage ceiling in the short term, pent-up demand of the past year is likely to contribute additional absorption of this enormous supply. ''This would help preserve the demand and supply equilibrium. In this scenario, prices are anticipated to appreciate at least in line with the inflation rate.''
