An increasing number of speculators and genuine home-buyers are breaking purchase agreements and forfeiting their initial deposits after being stung by a sudden correction in mass housing prices, estate agents say. They said defaults had been recorded in various districts, and were most widespread in new towns in the New Territories. Hong Kong Property Services (Agency) managing director Michael Choi Ngai-min said some buyers who had paid a 3 to 4 per cent deposit of the purchase price after signing preliminary agreements had defaulted, fearing a further reduction in prices. They had opted to default in order to minimise potential losses from the downturn in the housing market. However, the situation was not serious, he said. Mr Choi said mass housing prices had dropped 4 to 5 per cent in the past two weeks and he expected to see a further fall in some districts. Agents said transacted prices of Whampoa Garden in Hunghom had fallen as much as 10 to 12 per cent to $7,000 per square foot compared with $8,100 per sq ft in March. Home prices in Hunghom had been inflated substantially prior to last month's sale of Laguna Verde, a joint venture between Cheung Kong (Holdings) and China Light & Power, at over $9,000 per sq ft. Estate agents said speculators who might have several flats would be trying to sell at a discount in order to reduce the financial burden on them. This might put further pressure on home prices in the short term although agents said long-term prospects remained positive due to underlying demand for housing. Tuen Mun was among the districts hit most severely by recent negative news including the Government's new pre-sale restrictions on unfinished residential projects and the rise in interest rates. According to Midland Realty, 10 defaults have been registered on property transactions in Tuen Mun since March 26, when the Government introduced anti-speculation measures. Garry Lo, assistant sales manager of the agent's Tuen Mun Plaza branch, said numerous Tuen Mun flat-buyers did not have strong financial backing. They had failed to complete deals as banks were more cautious in extending loans now that home prices were heading downward, Mr Lo said. Agents said defaults had been seen in mass housing estates which have attracted strong speculation over the past 15 months. In Tin Shui Wai, at least two buyers forfeited their initial deposits as they pulled out for fear of further price falls. Some defaults were found in housing estates at Mei Foo Sun Chuen, agents said. David Chan, senior sales manager of Centaline Property Agency's Sha Tin branch, said a buyer had defaulted on the purchase of a 1,236 sq ft flat in Royal Ascot, Sha Tin, and had forfeited a deposit of more than $300,000. Agents said they were expecting more defaults in the short term as some buyers of Royal Ascot flats had said they were planning to back out on agreed purchases. A small number of defaults were reported on apartments in Palm Springs, Yuen Long and Metro City in Tseung Kwan O. Centaline Property Agency's Tuen Mun district manager Louis Ng said defaults accounted for only a small percentage of the 10,000-plus property deals completed every month. Despite the small numbers, defaults damaged sentiment, he said. Hong Kong Property's district sales manager Johnson Own Cheung-sang said selling prices for Kornhill flats in eastern Hong Kong Island had dropped back to $7,200 per sq ft, the same as two months ago. Including legal charges and other expenses, buyers who acquired apartments two months ago and resold them at today's prices would make a loss, he said.