The potential supply of first-hand private property in Hong Kong in the next three to four years has risen to a record high of 105,000 units, due to delays in construction and a slowdown in the sale of new properties as a result of the three-year epidemic and the ongoing interest rate hike last year.

On the other hand, the private property sales price index fell by 15.59% last year, the largest drop in 24 years.

Analysis points out that the record high potential supply of new properties is mainly due to the suppressed demand last year, and it is believed that developers will still put up properties in an orderly manner in the future, and the actual supply may not increase greatly.

The Housing Bureau announced yesterday that the potential supply of first-hand private residential flats is expected to reach 105,000 units in the next three to four years, a sharp increase of 10,000 units or 10.5% quarter-on-quarter, which is the highest since records began in September 2004.

Of this total, disposed sites with construction yet to commence will provide about 23,000 units, a quarterly increase of 6,000 units or 35%, a record high in the last five quarters, while unsold properties under construction will provide about 66,000 units, a quarterly increase of 3,000 units. These two segments alone brought in a total of 9,000 new units.

On the other hand, due to last year's property market correction and the slowdown in new sales, the number of unsold units fell to a quarterly low of 9,000 last quarter, a quarterly low in more than six years, resulting in a quarterly increase of 1,000 units to 16,000 units, the highest since early 2007.

For the year as a whole, there were 21,200 units, which fell short of the Government's forecast of 22,850 units, but was still 47.2% higher than the previous year and a record high since 2004.

For the year as a whole, there were 11,000 units, down 48.4% year-on-year and a record low since 2011.

According to Mr Cheung Chiao-chor, Managing Director of HLAC, the potential increase in first-hand private residential supply is mainly due to the epidemic in the past three years, which has slowed down sales, as well as the increase in new land grants and private land resumption. However, it is good that Hong Kong has enough inventory, and even if there is a supply of 105,000 private residential units in the next three to four years, the average is only about 30,000 units per year, which is "not a huge number".

In the past, even though the overall first and second-hand sales volume dropped significantly, there were still over 50,000 transactions last year, and over 70,000 transactions in 2021.

Therefore, he believes that the potential supply of over 30,000 units per year will not oversupply the market, but rather recover the undersupply during the epidemic.

On the other hand, he believes that the developers will push forward at their own pace and will not oversupply the market with a large number of units at one go.

However, as the interest rate hike cycle is not yet over, it will be difficult for property prices to rise significantly, and the abundant supply and healthy market will help stabilise property prices in the long run.

Although there are not many positive factors this year, the negative factors are gradually receding. It is believed that the property market will improve as the economy recovers and property prices will rise within 5% for the year.

The former includes government land grants and private redevelopment projects, reflecting to a certain extent that housing supply has indeed continued to increase and the government's target of increasing housing supply is being met in an orderly manner," said Li Junjie, Assistant Director (Professional Property Advisory and Valuation) of Prudential.

The further rise in the number of unsold flats is due to the economic downturn and investment climate of last year, and the competition is likely to be even fiercer this year, with new grants joining the fray and near-existing projects available.

Li Junjie said that competition for new developments is becoming fierce, but each project has a different positioning and target audience, and the sales strategy adopted by developers will also affect sales. If a property is offered for sale at a discounted price, it will have a greater impact on the secondary market.