Next year 16,400 flats are expected to be completed, down from 17,200 this year and last year's 17,320, according to the Rating & Valuation Department's Hong Kong Property Review 2006.

Releasing the review today, Deputy Commissioner HC Lo said the completion of 17,320 flats last year is the lowest since 1997. Due to the works delay in three housing estates the figure is 3,900 less than forecast.

Of last year's flats, about 53% were located in the New Territories, 25% on Hong Kong Island and 22% in Kowloon; and 76% are small-sized, 18% medium and 6% large.

No short fall

Mr Lo said there will not be a short fall in residential flat supply, as at present there are 64,000 vacant flats and 39,000 under construction. It will take about five years for the market to absorb these.

He added in the next two years, more than 33,000 flats are expected to be completed.

Mr Lo said that last year the take-up was 17,450 units, down 44% from 31,400 in 2004, mainly due to the low completion volume; while the vacancy rate re-bounded to 6% from 2004's 6.2%, to 64,000 units.

The highest vacancy rate of 18% is recorded in the Islands District, with 3,569 vacant flats, followed by Tsuen Wan's 11% and 8,100 vacant flats, while Yau Tsim Mong has the highest number of vacant flats at 8,400.

Mr Lo said flat prices last year rose 7% over a year earlier, while rentals rose 12%. Although there was a drop in prices and rentals in the fourth quarter last year, they re-bounded in December and January as a result of the re-surge in buyer confidence caused by the expected topping out of the mortgage interest rate.

Mr Lo said overall private office completions last year were 34,000 square metres, the lowest since 1970.

He expected office completions this year will re-bound to 152,000 square metres, and rise further to 186,000 in 2007.

Last year's take-up was 420,000 square metres, higher than 373,000 square metres in 2004. Grade A office space amounted to 324,000 square metres, while the vacancy rate dropped from 10.8% to 6.5%, mainly due to the rising demand of the financial sector.

Office prices and rentals rose 20% and 28% over a year earlier, while that for Grade A offices rose 19% and 35%.

Last year, commercial flats completed amounted to 111,000 square metres, up 22% over a year earlier. Take-up was 139,000 square metres and vacant space fell to 980,000, accounting for 10% of the total office space.

Commercial flat completion is expected to rise to 127,000 square metres this year and 119,000 in 2007. Last year's commercial flat prices and rentals grew 6% and 8%.

Mr Lo dismissed as false and misleading reports alleging there will be an addition of over $400 in rates for some Sham Shui Po residential flats this year.

He clarified the rates increase for small-sized flats is 8%, equivalent to $15 per month, while that for average Sham Shui Po residential flats is only 2%, that is $2 to $3 a month.

Mr Lo added the rates demand notes will be issued in mid-March, owners can raise objections before the end of May, and they can appeal to the Lands Tribunal if they are dissatisfied with the re-valuation.