A SQUEEZE on mortgage lending by Hong Kong's big banks sent property sales and purchase agreements tumbling 38.6 per cent in September, compared with August. The Land Registry recorded 9,025 transactions in September - a dramatic fall from a monthly high of 19,283 in July. The sharp slowdown in activity has caused property price rises to slow across the board. This confirms forecasts reported in Monday's South China Morning Post. The Jones Lang Wootton Property Index released this week showed the average price of medium and large flats rose just 2.24 per cent between July and October, compared with 15.2 per cent over the second quarter. Capital value growth in the office sector has been similarly hit. Prices rose just 6.95 per cent last month compared with a 16.72 per cent rise between April and July. The level of the drop-off in activity in September had been widely expected. Analysts have predicted further falls in transaction levels should banks maintain their hardline stance on mortgage lending. Michael Green, director of S. G. Warburg Securities, expects transactions to level off at around 7,000 to 8,000-a-month, assuming there is no change in lending policies by the banks. However, there could be periodical flurries back up to the 9,000 mark should an exceptional number of new developments be released on to the sales market in any one month. The cause for the drop-off in activity has been primarily three-fold. Firstly, and most importantly, banks, worried about their high exposure to Hong Kong's sometimes volatile property sector, have been getting increasingly mean about accepting new mortgage applications. And secondly, developers have cut back on the number of new projects being released on to the sales market - preferring to sit back and wait for better market conditions. This has particularly affected the launch of pre-sale units. Hong Kong's big banks have said they will no longer provide mortgage financing for purchases of flats more than six months before completion. Consequently, developers have reacted by holding back waiting to closer to projects' completion before going to the market. To a lesser extent, activity has also been slowed by a switch of some investment, and speculative money from the property sector to Hong Kong's booming stock market. The total volume of money involved in transaction in September was $24.63 billion. This compared with around $34 billion in September last year and $32 billion in September 1991. There were five complete en-bloc building mortgages granted last month and 22,050 other mortgages recorded by the Land Registry. This compared to six en-bloc sales and 14,946 in September compared with the same month last year