Effective mortgage rates fell to between 2.85 per cent and 3 per cent last month and, as calculated by property agency Midland Realty, that took the average monthly mortgage repayment below current monthly rents in 40 of 100 housing estates it monitors.

The latest fall in mortgage rates continues a declining trend that began in September last year, when local banks began cutting their prime lending rates in line with falling rates in the US. Home lending rates are priced against prime rates, which have fallen two percentage points to 5.75 per cent and 6 per cent since September last year.

Those falls have been mirrored by cuts in savings deposit rates as well. With renters getting as little as 25 basis points interest on their savings, they may be tempted to use their deposits to buy property instead.

'In the present situation, buying instead of renting is a favourable option,' said Buggle Lau Ka-fai, the chief analyst at Midland Realty.

Residential rents rose 20 per cent last year while prices grew about 23 per cent, said Mr Lau, adding recent events on the market might prompt a change of heart among renters.

For example, he said a tenant might expect to pay a monthly rent of HK$7,500 for a typical 500 square foot unit in Tsuen Wan Centre. However, assuming a 70 per cent mortgage repayable over 20 years and a purchase price of about HK$1.25 million, loan repayments on such a flat would be about HK$4,800 a month - a 30 per cent saving on current rental levels.

Based on the same assumptions, the monthly mortgage payment on a 500 sqft unit in Taikoo Shing valued at about HK$3.4 million would work out to about HK$13,000, a little more than the monthly rent of HK$12,500 for such a unit, Mr Lau said.

Jimmy Tsa Shun-fai, a senior manager at Centaline Property Agency in Mei Foo Sun Chuen, said the branch had conducted several transactions last month for renters who decided to buy instead.

One tenant was presented with a 20 per cent rise in rent when his lease came up for renewal in June. He chose instead to buy an 875 sqft unit in Mei Foo for HK$3.5 million or HK$4,000 per square foot.

'Such cases made up about 15 per cent of our transactions last month,' Mr Tsa said. The branch concluded 150 deals last month.

Hendrick Leung Lee-chung, the director and general manager of Centaline Finance, said people who had enough savings to make a down payment on a second-hand property - at least 15 per cent of the flat value - and had reliable and steady household income would be better off buying than renting in the present market.

Mr Leung said the case for buying was boosted by expectations that inflation would hit 6 per cent by the end of the year while mortgage rates could fall further to as low as 2.5 per cent.

'The housing market will be the primary beneficiary of this trend and investors should seize the opportunity presented by low financing costs to buy properties or stocks to offset inflation,' he said.

Wong Leung-sing, an associate director of Centaline Property's research department, said investors buying flats to rent were back in the market.

'Last month, we saw an increasing number of investors buying units with leasing contracts at Taikoo Shing. Such cases made up about 30 per cent of the transactions we handled in January,' he said.

As they were betting on greater upside potential in property prices, such investors did not mind taking over properties with tenancy agreements, Mr Wong said.

'They get to enjoy not only capital appreciation but also a higher return from rental contracts than they would get from depositing their money in a bank,' he said. Even if average rental yields fell 2 to 3 per cent because of soaring property prices, the investment equation still favoured buying property now, Mr Wong said.

Louis Ng Chap-keung, a Kowloon district director for Ricacorp Properties, said such investment interest was likely to focus on properties in key housing estates.

'It will be easier to find buyers in such estates when they want to cash out of their properties,' Mr Ng said.