Transacted prices in the second-hand property market have increased on average between 3 and 8 per cent since the middle of the month when the Government cut the prime rate 0.25 per cent, according to property agents.
Figures released by Midland Realty show that transaction volumes have fluctuated wildly between housing estates, dropping 20 per cent in Kornhill but increasing 350 per cent in Taikoo Shing.
As a result, property agents said it was still too early to talk about a recovery in the market.
'The improved sentiment is fragile,' said Michael Choi, managing director with Hong Kong Property Services (Agency).
'People are feeling that maybe the market has stabilised. But there is still fear that they might lose their jobs.' People in the new towns were still buying smaller flats priced at $1.5 million, while buyers in urban areas were spending $2.5 million for similar-sized flats, he said.
In the past two weeks, property agents said there had been a 60 to 80 per cent increase in people looking at flats in the second-hand market, with sales activity also rising.
Earlier this year, the second-hand market had been hurt by developers offering buyers new flats at cut-rate prices and a variety of easy credit terms.
Mr Choi said that the panic-selling which characterised much of the second-hand market during the past six months had ceased.
'The flats in Laguna City that were going for $3,400 or less six months ago are now selling for a more realistic price of around $4,000 per square foot and finding buyers,' Mr Choi said.
There also was an increase in the number of buyers looking to trade up flats, he said.
Property agents said that overall buying sentiment had improved thanks to the recent cut in the prime rate, the continued strong performance of the Hang Seng Index, the low interbank rate and the stability of the Hong Kong dollar.
They said that activity in the second-hand market also had improved because developers were now increasing prices to take advantage of the improved sentiment.
New-flat prices were now in line with the second-hand market or actually higher in some cases, property agents said.
'The gap between prices in the secondary market and prices in the primary market has narrowed significantly,' said Louis Chan, residential director with Centaline Property Agency.
Henderson Land had increased prices recently in its Tseung Kwan O projects 10 to 15 per cent to take advantage of the improved mood.
According to some property agents, sales of new flats had dipped significantly since the developer increased prices with buyers opting to investigate the second-hand flat market.
Property agents also said buyers were looking to the second-hand market because the selection available was much larger.
However, agents generally remained cautious about just how much the market had turned around.
They said potential buyers were concerned about the state of the economy and worried about losing jobs or having to take a cut in pay as a result of the worsening regional recession.
Vendors who tried to raise prices 10 to 20 per cent to take advantage of the improved sentiment were unable to find buyers, they said.