The latest interest rate rise has hit the housing market and is further depressing activity and prices, according to estate agents. Hong Kong interest rates have risen three times this year, adding a full percentage point to borrowing costs. With more possible rate increases ahead, further downside is expected and developers are tipped to become more aggressive in discounting prices to offload flats. Ricacorp Properties managing director Barry Law said the latest half percentage point rise in rates was well within expectations and would accelerate the present market correction. Transaction volumes had dwindled to very thin levels as buyers stayed on the sidelines for fear of further price falls, he said. With the prime lending rate at 9.5 per cent, further rate rises would keep people cautious, he said. But once the rate factor diminished, the market would stage a speedy rebound. While secondary market activity had suffered most in the recent correction, primary sales also took a battering. Developers have resorted to marketing gimmicks such as staging shows and carnivals in sales offices to attract interest. Mr Law said the gimmicks had done little to help developers as buyers were not forthcoming. Developers would have to make further efforts by selling projects at sharply discounted prices, he said, adding that a successful sale could help the market find bottom and re-establish confidence. Mr Law said mass housing prices had dropped by an accumulated 15 per cent since February. He predicted prices would fall a further 5 per cent in the short term. CB Richard Ellis' senior manager of global research, Margaret Ng, said the possibility of further rate rises would increase mortgage burdens. She said the abundant supply of flats and lack of job security would continue to contain buying interest. Many people preferred to do nothing for the time being in view of the unfavourable market, which meant there was limited demand from families upgrading from small units to larger flats, she said. Ms Ng estimated that there were about 30,000 new flats available for sale this year in addition to about 20,000 unsold units left over from previously launched projects. She said the market would remain stagnant with no positive news expected in the short term. She said it was difficult to see an immediate turnaround unless the Government took action to intervene, such as expanding home-loan subsidies to boost sentiment. Midland Realty executive director Victor Cheung said the volatile stock market had also affected sentiment. He said now was the worst time for the housing market and it was unlikely to see any further significant downturn. Transaction volumes were low especially in the secondary market, but the fall in prices was slowing, he said. Primary residential sales had decreased by 20 per cent this month, compared with last month, and more people were opting to lease rather than buy, he said. Mr Cheung said any recovery was unlikely until after June, but the impact of rates would diminish gradually. He anticipated that mass housing prices would fall more than 10 per cent this year.