Residential property prices have been hit by the tax increases proposed by the financial secretary last week, according to estate agents. The rise in salaries tax had hurt confidence and would reduce the effectiveness of the government's nine-point stimulus measures to stabilise the housing market, they said. Asking prices for secondary flats in private housing estates such as Kingswood Villas in Tin Shui Wai, City One Shatin in Sha Tin, Belvedere Garden in Tsuen Wan and Mei Foo Sun Chuen in Lai Chi Kok recorded declines of 5 per cent to 6 per cent following Antony Leung Kam-chung's Budget announcement last Wednesday, according to the research department at Centaline Property Agency. Average prices fetched over the past week in 10 major secondary private housing estates fell by 6 per cent to 10 per cent on reduced transactions. 'Some owners who had earlier adopted a wait-and-see attitude have lost hope after the Budget and slashed prices,' a Centaline spokesman said. He said the market was weakening most in areas with ample new supply. Average prices achieved at Metro City in Tseung Kwan O fell 10 per cent to HK$2,300 per square foot after the budget, compared with HK$2,563 per sq ft a week before. Prices at Kingswood Villas sank 8 per cent to HK$1,380 per square foot from HK$1,500 per square foot, he said. The price drop at Kingswood Villas was also partly attributable to the discount sale at Vianni Cove, a neighbouring new project by Cheung Kong (Holdings) and Sun Hung Kai Properties. The first batch of units at Vianni Cove was offered at HK$1,313 per square foot. A price war also looms in Tsueng Kwan O as privately run Nan Fung Development releases its Tseung Kwan O Plaza for sale against competition from the Housing Society's upcoming sale at Serenity Place. There are a total of 4,406 units in the two projects. Midland Realty executive director Victor Cheung said the budget had undermined sentiment already weakened by tensions over Iraq and expected price wars among developers. 'The property tax increases proposed by the Budget have psychologically affected investment market sentiment,' he said. 'The nine-point stimulus measures announced last November have improved confidence during the past few months but their effectiveness is largely reduced by the Budget's tax proposal.' Since the Budget, developers were offering new incentives equivalent to price discounts of 2 per cent to 5 per cent to offload their remaining units, he said. Mr Cheung expected the market to remain sluggish in the second quarter. Prices in areas with excess supply would come under pressure but transaction volumes might expand, he said. The luxury residential market was nearly frozen after major new projects had absorbed hundreds of buyers over the past month, Mr Cheung said. These projects included Residence Bel-Air in Pokfulam, One Beacon Hill in Kowloon Tong and 1 Ho Man Tin Hill Road in Ho Man Tin. Midland Realty chairman Freddie Wong Kin-yip said the overall transaction volume had plunged 44 per cent to 895 over the past week from 1,610 a week earlier. He urged the government to review the housing policy and adopt additional stimulus measures to halt the slump in the market.