New World Development is prepared to pay the government up to HK$7 billion in premiums for the right to convert agricultural land into residential use next year, according to managing director Henry Cheng Kar-shun. The conversion would generate a total gross floor area of more than two million square feet for development, Cheng said after yesterday's annual general meeting. The sites are in Tai Po Tsai, Wu Nga Lok Yeung and Yuen Long, as well as in Lok Wo Sha, which the firm will develop jointly with Henderson Land Development. Cheng said two luxury residential sites in Tai Po would be up for sale in Saturday's government land auction. Meanwhile, the company also plans to redevelop its flagship property, New World Centre in Tsim Sha Tsui, next year at a cost of about HK$10 billion. The redevelopment involves grade A offices, a hotel and a shopping centre with a total gross floor area of about three million sqft. Cheng (left) said despite recent concerns about a repeat of the property bubble of 1997, he did not see any risks. 'Demand for housing is more than the supply. It's enough to offset the negative impact even if mortgage rates increase. Property prices will keep growing,' he added. 'I expect property prices to grow 10 per cent next year. I don't want to see a lot of fluctuation in property prices.' His views were echoed by New World chairman Cheng Yu-tung, who forecast property prices would rise 8 per cent to 10 per cent next year. 'The supply of development sites in Hong Kong is limited, but the demand for housing is strong as the economy has improved. Interest rates will stay at current levels in the first half of next year,' he said. As the mainland maintains strong economic growth, Cheng expects the Hang Seng Index to keep rising. 'I won't be surprised if the index reaches 30,000 points,' he said.