Hong Kong's property market continues to experience a shortage of new supply, with the number of completed flats falling to a four-year low last year, but analysts expect supply to pick up in coming years. Figures from the quarterly report of the Housing Authority show that only 8,300 new private residential units were completed last year - nearly 18 per cent less than 2012. The number also fell far short of the government's expectation of 13,551 flats for 2013. Property prices were expected to fall this year following the introduction of the government's cooling measures in February last year. But analysts believe any reductions in 2014 will now be limited by the shortfall in the construction of new flats. "The shortfall occurred because government land sales rely on the land application list under which developers' expression of interest for land parcels leads to land auction," said Patrick Chow Moon-kit, head of research at real estate agency Ricacorp Properties. "As developers were reluctant to buy three or four years ago, and there is usually a lag of three to four years between land purchase and flat sales, we have a shortfall." But he added: "We should be aware that new housing supply will increase significantly in the coming three years. Some 15,000 to 16,000 flats are to be completed each year. The substantial increase in supply will put downward pressure on property prices. Owners of second-hand flats will need to cut their asking prices." Chow said he expected property prices to drop 5 to 10 per cent this year. The Centa-City Leading Index, which tracks changes in home prices in the secondary market, stayed at 118.20 for the week to January 5 - its second-lowest level since the government doubled stamp duties in February last year. The Housing Authority's figures also show construction started on only 14,100 flats last year, compared with 18,600 in 2012. New residential projects have come on the market since the fourth quarter of last year, but units available for sale fell from 72,000 by the end of September to 71,000 at the end of the year. Analysts believe the shortage of new supply may be alleviated this year. Chow expects more private projects will also be completed as the government released more sites in 2010. "Some of the projects have been postponed to this year. I expect 15,000 to 16,000 flats will be completed in 2014," he said. Wong Leung-sing, an associate director of research at Centaline Property Agency, forecast construction would start on nearly 20,000 flats this year, while Midland Realty chief analyst Buggle Lau Ka-fai said supply had already improved compared with the past few years. "There were 71,000 flats still available for sale at the end of last year, even though the primary market was very strong in the fourth quarter and over 4,000 flats were sold during the period. It shows developers are actively replenishing the land bank," he said. "Property prices will drop 5 to 10 per cent this year. But prices may drop 20 to 30 per cent if new supply increases significantly and interest rates rise two to three years down the road."