HONG KONG: The city's real estate developers have drastically slowed down the construction of new housing projects, a phenomenon reflected in first quarter government housing data.

Transport and Housing Bureau data show that only 1,600 new housing units were completed in the first quarter this year, a sharp 60 percent decline from the number of flats built and completed in the fourth quarter last year.

Actual construction of new flats in the first quarter was 1,700 units, down 19 percent from the level in the previous quarter.

Meanwhile, the number of unsold flats reached 54,000 in the first quarter, 4 percent higher year-on-year.

Real Estate Developers Association (REDA) vice chairman Leung Chi-kin said the sharp drop in the number of completed and constructed flats in the first quarter reflected property developers' "lack of opportunity last year in acquiring plots of land" for use in the development of new housing projects.

The government is currently using an "application list" system to sell developable land, a scheme described as cumbersome by scores of developers.

Under this system, a developer interested in buying a plot of land, posted in a government list, has to offer a guaranteed minimum price for that particular site. If the government finds the offer acceptable, the plot of land is then released from the list and offered for sale through a public auction.

Other analysts said the sharp slowdown in actual housing completion and construction in the first quarter was due more to the decision of developers to cut production of new flats in response to weak demand as Hong Kong's economy continues to reel from global recession.

The Transport and Housing Bureau said the slowdown in first quarter actual completion and construction of new apartments was due in part to an acceleration of completion of new housing projects in the fourth quarter last year.

Only 8,800 apartments were completed last year, marking the sixth consecutive year of decrease in new housing construction.

Hong Kong property prices have been coming down since last year as the city's economy reels from the impact of global recession, dampening homebuyers' appetite to buy new flats.

Sales of new flats have also been adversely affected by tighter lending policies adopted by most banks as the global financial sector bore the brunt of the global financial crisis.

In a bid to stir up activity in the local housing market, the Hong Kong Mortgage Corporation raised the mortgage insurance coverage limit up to 30 percent of the value of the property for loans on residential properties.

An analyst, who declined to be identified, said unemployment rate and the state of Hong Kong's economy serve as benchmarks of activity in the housing market.

"Given the whole year gross domestic product (GDP) growth of 2.5 percent last year and rising unemployment rate, buying sentiment became weak over concerns over job security," he added.

Meanwhile, Land Registry data show that sales and purchase of apartments remain healthy despite weakness in the economy.

Its data show that some HK$25.4 billion worth of sales and purchase transactions, involving residential premises, were recorded in March, up 87 percent from the February level.

The number of sale and purchase transactions involving residential properties rose 60 percent in March compared to the previous month's level.

Some analysts attribute this phenomenon to scores of homebuyers who bought units as they took advantage of prices which have come down since last year.

(HK Edition 04/25/2009 page5)