Property sales slumped last week, despite an increasing number of owners cutting prices, following the introduction of new stamp duty.
Flat owners cut prices 3 to 5 per cent, but in some cases buyers demanded a 10 per cent discount.
Not willing to blink first in this battle of nerves, many owners are holding on to their properties, resulting in fewer transactions.
Data compiled by estate agency Ricacorp Properties shows that in the 50 housing estates it monitors, 100 second-hand flats were sold in the week to November 11, the lowest weekly sales recorded in nearly a year and a 28 per cent drop from the previous week.
Separately, a poll has found that Hongkongers' interest in buying property has dropped since the government introduced the new measures.
On October 26 the government announced that non-permanent residents and buyers who use company names would have to pay an additional stamp duty of 15 per cent of the price.
The extra tax came on top of increases in the stamp duty for flats resold before a certain period, which, in turn, was extended from two to three years, in a bid to check speculation.
"Many home seekers are not willing to buy unless prices are cut 10 per cent," said Louis Chan Wing-kit, Centaline managing director (residential) for Asia-Pacific.
According to Chan, luxury homes have been particularly hard hit as no major transactions have been recorded in this segment. "Buyers of luxury homes will not enter the market if prices don't fall more than 10 per cent," he said.
However, the turnover has been brisker in large housing estates.
A 1,931-square-foot flat at Harbourfront Landmark in Hung Hom sold for HK$32.3 million - 8 per cent below the market rate - said Tim Chu, sales manager of the Hung Hom branch at Ricacorp Properties.
In Yuen Long, an owner sold a 1,410 sq ft flat at Palm Springs for HK$6.4 million, cutting the price 5 per cent.
"Sales will continue to drop, and this is one reason why many flat owners are willing to go lower," said Chan, predicting prices would fall 10 to 15 per cent from present levels.
Meanwhile, a Citibank poll of 2,126 people aged 21 to 60 from May to November found 16 per cent were interested in buying property from May to July.
This number rose to 24 per cent between August and October, after the government introduced 10 measures on August 30 to increase housing supply and the Hong Kong Monetary Authority clamped down on second mortgages on September 14.
But after the latest curbs, those interested in buying dropped to just 19 per cent.
Lawrence Lam Chi-kong, director of sales and secured lending at Citibank Global Consumer Group, said the swing in interest levels was a reflection of the prevailing uncertainty in the market.
According to Kwong Kai-sun, an associate professor of economics at Chinese University, the market was relatively unmoved following the government's and HKMA measures about two months ago. But last month's curbs were interpreted as a more concrete sign of the government's determination to cool prices.
Since a section of property buyers were investors, they were less inclined to want to buy in the current environment, Kwong added.