Improving sales in the primary residential market are reviving recovery talk among developers, but many industry analysts remain cautious. With the unemployment rate rising to 5.5 per cent and the secondary market still in the doldrums, analysts said it was premature to say a full recovery was happening. Encouraging sales in two mid-range residential projects over the weekend ignited hopes that buying interest was returning to higher-value flats following a rise in sales in the low-end sector. A consortium led by Wharf (Holdings) sold more than 350 units at its Sorrento project at Kowloon Station since internal sale began on Friday night. Units sold ranged from 850 square feet to 1,200 sq ft. At the same time 200 units at Rival project Victoria Towers in Tsim Sha Tsui, developed by Cheung Kong (Holdings), were sold. About 80 per cent of the flats were of 1,200 sq ft. Developers seemed pleased with the sales results. Sino Land chairman Robert Ng Chee Siong said last week that October was the best month for developers' sales this year, with more than 3,000 units sold. 'The result is incredibly encouraging. Even after the September 11 event, Hong Kong people still have great confidence in the property market,' he said, adding the market had started to recover. On Sunday, Cheung Kong (Holdings) chairman Li Ka-shing said: 'In the past few months, thousands of properties were sold. This situation was not seen before.' He said transactions had continued to increase in the past three months and the situation was not limited to small properties. Mr Li said property prices were cheap at present but refused to confirm the property market had recovered. Sun Hung Kai Properties vice-chairman Thomas Kwok Ping-kwong said the residential property market would move in a different direction from the sluggish economy. Investors would buy properties to tap rental income because of the low interest rates. However, property agents said the secondary residential market had not improved much and it was, therefore, too early to talk about a full recovery. Developers have continued to bank on more sales incentives such as top-up loans, mortgage subsidies and cash rebates, which amounted to price discounts in disguise. Secondary home sellers have had to cut prices to compete with developers for buyers. Midland Realty executive director Victor Cheung said the market had yet to recover generally. The market for small properties had recovered but activity in medium-size to large properties had picked up only for two to three weeks, with trading concentrated on two new projects - Victoria Towers and Sorrento. The secondary market had not improved significantly and buyers were mainly end-users, not investors. Because of this, Mr Cheung said the market had not truly recovered. It would be more likely to recover in the first quarter of next year, when monthly transaction volume was expected to increase to 9,000 to 10,000. Jones Lang LaSalle senior national director Lau Chun-kong said the consecutive interest-rate cuts since September had reduced the mortgage rate to about 3 per cent, well below the average 5 per cent rental yield on the market. This had helped release some purchasing power. Mr Lau said sectoral performances in the property market were good but the whole market situation would depend on the economy. The market was still challenged by the economic slowdown and increasing unemployment. It was too early to talk of a full recovery, which hopefully would happen next year. Surveyor Tony Chan Tung-ngok said the situation in the property market was mixed, with positive effects from low interest-rates, reduced new supply and suspension of the Home Ownership Scheme housing sales. However, the market lacked real confidence boosters, he said. He expected prices to remain stagnant, before the market was stimulated.