At the same time, the Hong Kong Monetary Authority said it had told banks to cut loans to luxury home buyers and property investors from the current 70 per cent of a property's value to 60 per cent. The Monetary Authority said the tighter lending rules would apply to properties costing HK$12 million or more and all properties not for self-use.

The measures, announced before the sale of two Kowloon sites next Tuesday, are attempts to address the public outcry over the continuing rise in flat prices, which in some large estates have passed their 1997 peak.

Analysts said bringing back the ban on swift resales - first imposed in 1994 but lifted when the property bubble burst in 1998 - would have little impact on flat prices. However, they praised the government for increasing residential land supply.

Flats have become steadily less affordable despite a string of measures announced this year. The proportion of an average household income required to pay the mortgage on a 45 square metre flat reached 41.5 per cent in the second quarter.

To discourage speculation, Tsang said, the government had immediately banned confirmor transactions - resales before a transaction is completed - of uncompleted new flats. Such transactions have recently accounted for about 2 per cent of sales.

In the case of the cancellation of any purchase of a flat, the buyer will now forfeit 10 per cent of the price instead of 5 per cent.

The Mortgage Corporation, which offers an insurance programme enabling buyers to borrow more than the banks' maximum, will no longer accept applications for loans of more than 90 per cent of a property's value and will cap the buyer's debt-to-income ratio at 50 per cent instead of 60 per cent.

To address concerns about a shortage of flats, Tsang (pictured) said more than 9,000 would be available in the next financial year, while land for more than 4,000 would be provided at Kai Tak by 2015.

Instead of relying on developers to trigger land sales, the Lands Department will initiate auctions of three sites in Chai Wan, Fanling and Hung Hom next month. Tsang said that in due course, about 20 hectares of land in the New Territories now slated for industrial and business use could be converted to residential use. The Planning Department is also studying the possibility of changing to residential use sites now reserved for government, institution and community uses.

'I would like to take this opportunity once again to remind potential homebuyers to be cautious when borrowing money to purchase property,' Tsang said.

'They must be aware that current levels of interest rates are unusually low, and their repayment burden will soar when interest rates return to more normal levels and the property market makes the necessary price adjustments.'

Chau Kwong-wing, chair professor in the department of real estate and construction at the University of Hong Kong, said past experience showed that resales of flats before the transactions were completed had only a brief impact on prices.

He said investors could use a loophole by buying a flat in the name of a company, allowing them to resell the company before the purchase of the flat was completed.

'The [earlier ban] did lead to a quick drop in property prices in 1994. But the prices went up afterwards, until they reached the peak in 1997,' he said.

'The problem lies in the public expectation of land supply. They rush to buy flats when they foresee an insufficient supply.'

Chau praised the government for disclosing the potential amount of converted residential sites.

'But the devil lies in the details,' he said. 'The government will have to tackle the problem of multiple ownership of industrial buildings and to improve the infrastructure and environment of the industrial sites.'

Industry players said Hong Kong's booming housing market would experience a consolidation after the announcement, with prices falling about 5 per cent in the coming months.

Sales volume this month could plunge as much as 30 per cent from last month, and prices could fall 5 per cent, they said.

Meanwhile, surveyors lowered their price forecasts for the auction of the two sites in Kowloon by 3 to 10 per cent. The sites at Argyle Street in Ho Man Tin and Hung Hom Bay Reclamation are now expected to sell for HK$5.7 billion to HK$6.2 billion.

'The measures indicate the government's determination to curb home prices, and that will bring a psychological blow to the market,' said Royal Bank of Scotland analyst David Ng.

Louis Chan, a director of Centaline Property Agency, agreed.

He expects this month's sales volume to drop as much as 30 per cent from July's figure and prices to drop 3 to 5 per cent from last month.

But analysts said the impact of the measures would not be significant, especially the ban on confirmor transactions in the primary market.

'Unlike 1997, we do not see too many speculators in the market at the moment. Purchasing costs are cheaper owing to low interest rates, and home prices have not surged as fast as in 1997,' Ng said.

According to Centaline, just 83 of the new-home sales last month were confirmor transactions. In the same month, 14,885 property sales were reported to the Land Registry.

Victor Lui Ting, an executive director at Sun Hung Kai Real Estate Agency, expects prices to stabilise but does not think home prices will drop. The company will sell the latest batch of units at its luxury residential project Larvotto in Ap Lei Chau today.

Commenting on the impact of the tightening measures on luxury-home lending, Lui said: 'Most of our clients borrow less than 50 per cent of their purchases, with some not arranging any loan.'

Mortgage broker mReferral's data shows that there were 879 deals valued at HK$10 million or above last month.

The impact of the measures on the overall market will not be significant, according to Shermaine Lau, chief economic analyst at mReferral Mortgage Brokerage Services.

Shares of Hong Kong developers dropped ahead of the government announcements.

Cheung Kong (Holdings) fell 1.36 per cent to HK$101.70, Henderson Land Development fell 0.99 per cent to HK$50.05, Sino Land fell 2.63 per cent to HK$14.08, and Sun Hung Kai Properties fell 1.46 per cent to HK$114.70.

Fresh measures

Rapid flipping of flats banned, more land to be released for housing

The cap on loans for buyers of luxury homes and investment property will be reduced from 70 per cent to: 60%