Property bubble could reach level of 1997, analysts warn

Analysts warn that Hong Kong could see a repeat of the 1997 property bubble as government figures show that the supply of new flats has dropped to a five-year low, a condition that could boost prices to unsustainable heights.

'Limited new supply and low interest rates encourage investors to enter the property market for investment,' said Eric Wong Chun-yu, a co-head of Asia property research at UBS.

He said the current property bubble had not yet reached the level of 1997. 'But the bursting of the bubble is unavoidable. And [it] is expected to burst in about six months.'

The Centaline City Leading Index shows that prices of 86 key housing estates have risen 27.56 per cent since the beginning of the year and returned to the peak level of last year.

The latest figures from the Transport and Housing Bureau show that the number of units available for sale fell to 47,000 at the end of last month from 49,000 units at the end of June. The new supply is the lowest level since records began in the third quarter of 2004.

About 11,822 units were sold in the last two quarters.

Owing to the strong property sales, the number of unsold units at completed projects dropped to 7,000 last month from 8,000 three months ago. There are only 40,000 units under construction but not yet sold.