HOME buyers of University Heights in west Mid-Levels are poised to benefit from the preferential mortgage terms provided by Hongkong Bank. It is not surprising that the bank, which insists on restrictive mortgage lending following the Government's official line, would provide better mortgage terms in this project. It is an equal partner in the residential development with Cheung Kong (Holdings). The bank's employees also enjoy the right to buy some of the 444-unit new project through internal sales prior to the public launch. Although historically Hongkong Bank has not shown interest in participating in development projects, other banks have been quite aggressive in this area. While banks' exposure in property development is relatively small compared to commitments in overall bread-and-butter activities, potential gains are huge, provided there is an appreciation in prices. Hongkong Bank is expected to realise respectable profits from the University Heights sale, although the selling prices may be lower than earlier expectations due to sluggish market conditions. Bank of East Asia, which has also ventured into property development, saw its interim profits bolstered by earnings from the sale of its Kennedy Town residential properties. Bank of East Asia has demonstrated strong interest in expanding its residential property investments. Earlier this year, it joined developers in purchasing two residential sites in government auctions. Besides getting potential property gains, banks are particularly advantaged in being able to secure mortgage financing for those property projects in which they are involved. Banks' recent drives to compete for property mortgage business show their confidence in the residential market following the dramatic falls in prices since last year. Hang Seng Bank's $1.1 billion acquisition of 10 office floors in Telford Plaza Tower II last week for its own use also represents a vote of confidence to the overall market. Recent signs show that the property market appears to be in better shape than earlier this year, although it is still too early to talk in terms of a recovery. Short-term prospects for the residential sector hinge on the sales and marketing strategies of developers. If developers stop cutting prices further in new properties, the market will be able to take a breather, which may help revive confidence of buyers and investors. Prices of new flats in Kingswood Villas, Sunshine City and Bayshore Towers seem to be stabilising after their recent releases. Home prices in Fanling are facing pressure from the imminent release of the 2,710-unit Floral Plaza project, jointly owned by Henderson Land Development and Chinachem Group. In Tai Po, Sino Land's Classical Gardens and Hang Lung Development's Parc Versailles may have to battle for buyers by offering competitive prices. Other sales include Playmates Properties' Village Garden in Happy Valley and China Overseas Land and Investment's Villa Camellia in Yuen Long.