HONG KONG: The SAR government, acting in conjunction with the Urban Renewal Authority and the MTRC, may increase land supply in coming months, as record prices for some local apartments have raised concerns over a possible bubble in the property market, Chief Executive Donald Tsang said in his fifth policy address yesterday.

Tsang said the government, well aware of the recent sky-high prices of local luxury flats, will "closely monitor market changes" in the next few months.

"The relatively small number of residential units completed and the record prices attained in certain transactions this year have caused concern about the supply of flats, difficulty in purchasing a home, and the possibility of a property bubble," Tsang said in his annual policy address yesterday.

Local developer Henderson Land Development said it sold a duplex in the Mid-Levels for HK$71,280 per square foot, setting a world record for an apartment square-foot price.

Residential property prices in Hong Kong have leaped 26 percent in 2009, while the low supply and strong demand for luxury apartments has boosted them to record-highs.

Nomura, a major Japan-based investment bank, estimates that mainland buyers now account for 11 percent of property sales in Hong Kong.

"Strong liquidity, low supply, strong external demand and aggressive mortgage lending are creating ideal conditions for another housing bubble in Hong Kong," Nomura property analyst Paul Louie said in a research report.

The government, which has not sold residential land for one and a half years, said it may step in to stabilize the local property market.

"When necessary, we will fine-tune the land supply arrangements and discuss them with the Urban Renewal Authority and MTR Corporation Limited with a view to quickening the pace of bringing readily available residential sites to the market," Tsang said.

Property analysts believe that the government's new supply of land will not take a heavy toll on local property prices.

Wong Leung-sing, associate director for research at Centraline Property Agency, said the property bubble exists only in luxury flats, instead of the general residential units.

"The government may not supply too much land in the foreseeable future, as the demand for general residential units is not fierce," chief analyst of Midland Realty Buggle Lau said, adding that the current supply of property units is still larger than the demand. He believes the market now has around 50,000 residential units available, of which 41,000 units are still under construction.

(HK Edition 10/15/2009 page4)