The government yesterday revised downwards by more than 30 per cent its forecast for the number of new residential units to be completed this year, which property agents interpret as meaning that the upward spiral of home prices will accelerate. The Rating and Valuation Department said the number of new residential units was expected to reach 10,980 this year, lower than its earlier prediction of 16,000 units and just 510 more than last year's decade-low supply of 10,470 units. The tight supply has helped residential prices in the secondary market to leap 21 per cent last year from 2006, while rents rose 15 per cent. Although the government agency predicted that supply of completed units would increase to 12,670 next year, that level still would be lower than the average of 27,000 units per year between 1998 and 2004. Property agents attributed the decline largely to developers deferring the launch of new projects in anticipation of continual economic improvement fuelling home prices. 'I think the lower than expected figure is a surprise,' said Buggle Lau Kai-fai, the chief analyst at Midland Realty. 'Developers will definitely not offer their new flats at competitive prices in view of the tight supply.' Mr Lau estimated that in the first two months of this year, home prices had risen 8 per cent. Hong Kong Property Agency chief executive Fredy Wu Yat-fat said the news would certainly add a new catalyst to the robust residential market. With tight supply, falling mortgage rates and rising household income, Mr Wu forecast residential prices would jump 30 per cent for the whole year. Tang Ping-kwong, the acting deputy commissioner of the Rating and Valuation Department, played down concerns over the lower than expected supply of new flats, saying an additional 65,000 units - either unsold or under construction - would come on the market over the next few years. On top of the estimated 10,980 homes to be completed this year, Mr Tang said about 10,000 were unsold in the hands of developers, 45,000 were under construction, and 10,000 were from previous land sales but not yet developed. 'These units will come on the market over the next several years as it takes two to five years for a project to be completed,' he said. Mr Lau said developers would want to hold on to their projects until prices were right. 'Developers will increase their margins by achieving higher prices rather than increasing volumes,' he said. Mr Lau also said growing difficulties of acquiring land at reasonable prices would explain why developers would not rush to sell their projects. Meanwhile, the government agency said completed office space would increase 6.8 per cent to 342,000 square metres this year, of which 80 per cent would be in Kwun Tong and the Eastern district. Last year, overall vacancy rate in the office sector was 8.9 per cent.