Property speculators are back. The recent sales of new residential projects found up to 90 per cent of the buyers were investors. New projects with smaller flats in Kowloon and on Hong Kong Island and luxury flats at Kowloon Station are proving the most attractive to investors. Chinese Estates Holdings released the first batch of 40 flats at One South Lane, a single-block development in Western, on September 9. Property agents estimated nearly 90 per cent of the buyers were investors. Hang Lung Properties relaunched the remaining flats at the HarbourSide on Kowloon Station at the end of August. More than 60 per cent of the buyers were investors. "In the middle of last year, only 10 per cent of buyers at new projects were investors. But in recent months, you can see that at least 50 per cent of the buyers at new projects in Kowloon and on Hong Kong Island are investors," said Sammy Po Siu-ming, chief executive of Midland Realty's residential department. The government has doubled stamp duties and introduced a special stamp duty to curb investment demand, though these have been offset by developer subsidies. He said investors had turned active because of improving market sentiment since March. "They believed property prices would not drop due to the lack of housing supply. The increasing rents also encouraged them to buy flats to enjoy a rental yield of 3 per cent," he said, adding the return of property investors would support the prices of new homes. Investors are the most active in small-flat developments like One South Lane. The first batch of flats released for sale was sized between 210 sqft and 268 sqft. The government encouraged the building of small flats to increase housing supply in the belief they could be more affordable for first-time buyers and end-users. It has introduced restrictions on the number of flats at many residential sites for land sale in recent years. However, the flats at One South Lane sold for HK$4.36 million to HK$6.16 million, even with an 18 per cent discount. These prices are out of reach of first-time buyers, but not investors. "The restriction on building small flats may help the government to fulfil its housing supply target easier. But it won't solve the problem," said Patrick Chow Moon-kit, head of research at Ricacorp Properties. "The demand for 600 to 700 sqft flats is the strongest. The government should increase the supply of medium-sized flats. It may lead to negative equity problems in the short run. But in the long term, the city would benefit from it." Eddie Hui Chi-man, a professor of real estate at Hong Kong Polytechnic University, echoed the views. "The restrictions in building small flats will only help the government to meet its building target," Hui said. "The market has changed. Previously, there was a lack of small flats. Now, under the cooling measures, flat owners are unable to upgrade and buy bigger flats. "Small flats saw strong sales and offered an opportunity to investors who were looking for capital gains." He said the situation would continue until the supply of new housing returned to the normal level of 18,000 to 20,000 a year.