The big are getting bigger. Just seven years ago, Sun Hung Kai Properties (SHKP) and Cheung Kong (Holdings) accounted for just over a third of the new private homes put up for sale. This year, seven out of 10 new homes will come from them - a near-doubling of their market share and a dramatic illustration of how the market for new homes is increasingly dominated by a handful of firms. One key reason for this concentration? Government policies that price land out of the reach of all but the biggest developers. 'All the sites from government auctions and development projects tendered out by the MTR Corporation are too big for mid-scale and small developers to bid,' said Ken Yeung, an analyst at Citigroup Global Markets Asia. 'Even redevelopment projects led by the Urban Renewal Authority (URA), which are not that sizeable, also attracted big developers, leaving no room for small firms to compete.' The result, analysts say, is a continuing focus on higher-end flats in the new-home market - and probably strong staying power among developers even if prices dip. And that means prices will likely stay firm. Prices of flats, as measured by the Centa-City Leading Index, have risen 12 per cent this year. Together with the 29 per cent increase last year, the property market has already surged more than 40 per cent from its bottom during the global credit crunch. 'Most new units are now selling for almost HK$10,000 per square foot. Even I [as a high-income professional] will not be able to buy a new flat of reasonable size for my family of six,' said Polytechnic University associate professor Dr Lam Pun-lee. Figures from Centaline Property Agency, based on Land Registry sale and purchase records, show that the top four developers - SHKP, Cheung Kong, Kerry Properties and Sino Land - accounted for 74 per cent of all new flats sold in the first half of this year - an increase of 20 percentage points from seven years ago. Back then, the top four developers - which included New World Development but not Kerry Properties - accounted for just over half of all new units sold. (Kerry Properties is part of the Kerry Group, the biggest shareholder in the SCMP Group, which publishes this newspaper.) That matches Consumer Council data that shows 55 per cent of new units from 1991 to 1994 were built by the top four developers. In the first half of this year, SHKP and Cheung Kong together accounted for more than 60 per cent of the market. Citi Investment Research & Analysis estimates the two companies will between them launch 12,000 homes for sale year - over 70 per cent of the 16,624 new homes the securities firm expects to come to market from all developers this year. That is good news for shareholders of both companies, but Professor Raymond So of the Hang Seng Management College worries that the rise of superdevelopers undercuts the government's objective of providing more small to mid-sized apartments for the mass market. 'The real estate market is controlled by a few big developers who are only interested in selling luxurious units for higher profit,' So said. 'As they won't bother to build another mass market estate like Taikoo Shing, retail buyers are stuck at Taikoo Shing and other old developments, which will thus push up secondary market prices.' The big developers will also be better able to ride out a down market without cutting prices, analysts say. 'As large developers dominate the primary property market, they can easily hold [back] units for sale, as they are financially very strong,' Yeung said. 'For example, in the second half of 2008, when the economy hit bottom, developers didn't feel any pressure to put their portfolios up for clearance sales.' Higher prices do not just benefit property developers, of course; existing homeowners do not like seeing their investment fall. Balancing those interests against those of people who are feeling priced out of the market is a tricky task for the government. And there it is itself conflicted. 'It is a structural issue relating to the government land sale policy,' said Thomas Cheng, chairman of the Consumer Council's competition policy committee. 'From my own estimate, a site can sell for a higher price in one piece than being separated into four smaller pieces. If the government was willing to sacrifice part of its land revenue by cutting up land for auction, the property market wouldn't be so highly concentrated in the hands of big developers.' The MTR Corporation and the URA, two government-controlled entities, have granted mega-residential projects in the past few years. Their projects accounted for about 42 per cent of new-home sales last year and 31 per cent in this year's first six months. Launched this year, the MTR Corp's La Mer in Tung Chung, Lohas Park in Tseung Kwan O and Festival City next to its Tai Wai depot, all developed by Cheung Kong, provided more than 4,000 flats. Last month, SHKP launched 377 flats at Lime Stardom, a redevelopment with the URA in Tai Kok Tsui. One of those flats went for HK$12.31 million, or HK$11,640 per gross square foot; the cheapest, a 345 sq ft studio flat, fetched HK$2.52 million, or HK$7,290 per square foot. Lam said the developers' preference for building upmarket flats on sites obtained from land auctions or the two quasi-government bodies had caused a structural problem. He says developers always argue that homebuyers can go to the secondary market if they don't have deep enough pockets for new flats and that, since there are more than a million homes for sale in the secondary market, developers claim they cannot dominate the property market. 'But if we really study the supply figures, we find that the supply in the secondary market is not as big as we might have expected,' Lam said. Examining data from the Rating and Valuation Department, Lam found that among the 1.8 million private homes in Hong Kong, about 400,000 are Home Ownership Scheme flats, for which a land premium must be paid before they can be sold on the secondary market. Of the remaining 1.4 million units, about 400,000 are village houses, which are not in the mainstream market because of potential land- lease problems. 'If we also take away those apartments more than 30 years old and the 50,000 unsold inventory of the developers, the volatile pool has only about 600,000 units,' Lam said. 'If big developers continue to build high-class 'works of art' that mostly attract mainlanders and speculators, secondary market prices will unavoidably climb further, even if demand remains normal.' A spokeswoman for the Commerce and Economic Development Bureau said the government recently gazetted the Competition Bill, which 'aims to prohibit and deter undertakings of different sizes in all sectors [including the property sector] from adopting abusive or other anti-competitive practices'. However, the bill would not stop developers dominating the market as long as there was no abusive behaviour, she said. The Transport and Housing Bureau said it was consulting the public about whether to use public money to subsidise home ownership. Cheung Kong said its development policy was driven by demand and that some of its projects addressed the needs of homebuyers from all walks of life. 'For example, there will be two-room to four-room apartments in the project at Tseung Kwan O Area 85 to satisfy the market,' the firm said. SHKP, for its part, said it had always built a substantial number of small to medium-sized flats in addition to premium apartments. 'We do point out that developments must meet the needs of Hong Kong people and contribute to the sustainable growth of society, supported by good town planning,' a representative of the company said.