HONG KONG (BLOOMBERG) - Hong Kong Chief Executive Leung Chun Ying said the government raised its target for new housing supply, dismissing calls from developers to lift property curbs as prices are still too high.

"We should continue to tackle the housing problem head-on and must not concede," Mr Leung said in his annual policy speech to lawmakers on Wednesday (Jan 13). Prices and rentals are "still beyond what people can afford," he said.

He pledged a higher number of public housing units, revising the forecast to 97,100 in the next five years, up from a previous estimate of 77,100 units while private developers may offer 87,000 new units in the next three to four years, the most since data was first complied in 2004.

In the past three years, the Hong Kong government has tightened mortgage requirements at banks and doubled stamp duties as well as introducing a special tax on non-resident buyers after property prices soared. Prices peaked in September last year, up 160 per cent from December 2008, making the city in the world's most expensive place to own a home.

Prices started falling in the fourth quarter of 2015, when they dropped 7.5 per cent, as a slowing economy and concerns of rising interest rates sapped demand. The price decline will accelerate to 8 per cent this quarter as developers engage in a price war, said Nicole Wong, head of property research at CLSA Ltd.

Ms Wong discounted Mr Leung's comments about leaving property curbs in place, saying he may change policy in six months should prices plunge 15 per cent, leaving the possibility of negative equity for home owners who have borrowed as much as 90 per cent of property prices by taking second mortgages offered by developers.

"Any correction should not destabilise society," she said. "If prices fall 15 per cent in six months, the government would have to start a policy action."

The Hang Seng Properties Index, which tracks the performance of 10 real estate companies, has fallen 8.3 per cent this year to date.