Nan Fung project in Tsuen Wan manages to sell 350 units over the weekend using low prices to draw first-time buyers Signs of improvement in the mass residential market have emerged after a project in Tsuen Wan recorded strong sales but home prices are unlikely to surge in the near term, according to agents. Despite higher than expected inflation rates, pay rises and hefty stock market gains, agents said home prices have remained unchanged so far. Over the weekend, Nan Fung Development managed to sell 350 units, or 80 per cent of its mass residential project, H Cube, in Tsuen Wan using a low-price strategy. The flats, aimed at first-time buyers, were sold at an average of HK$3,300 per square foot with some units selling for just HK$1 million. 'The market atmosphere is better than last year. But despite these sales home prices will not rise in the short term amid an absence of investors and speculators,' said Shih Wing-ching, the chairman of Centaline (Holdings), which runs Centaline Property Agency. The number of high-profile investors buying new flats at above market prices had dropped significantly compared with 2005, he said. 'We need to watch the market closely for the next few months,' Mr Shih said. He does not expect prices to rise significantly until the second half of the year. Meanwhile, Buggle Lau ka-fai, the chief analyst at Midland Realty, believed investors would return to the market as inflation continued to rise. He said zero or negative interest rates would become a reality soon with Hong Kong's inflation rate reaching 2.3 per cent and the deposit rate at 2 to 3 per cent. According to government figures released on Monday, rising rent and food prices pushed up consumer prices 2.3 per cent last month, compared with a year ago. The figure was above the 2.2 per cent consensus estimate. 'This will be positive for the property market as people will seek other investment alternatives instead of parking their money in banks. Buying property is one of the most popular investments in Hong Kong,' Mr Lau said. He said home prices would need the support of an active trading market. 'We will probably see a surge in transaction volume in the secondary market first, then a rise in price will follow,' he said. According to Midland Realty figures, the number of transactions at 35 surveyed housing estates rose 4.3 per cent to 242 for the past week to Monday. Mr Lau predicted the medium-end residential sector would see a 'sparkling' performance this year with strong demand from upgraders. Dennis Chow Chi-chung, sales director for Midland Realty's Tsuen Wan district, said the area's secondary market would benefit from the strong sales at H Cube. Some home seekers turned to nearby housing estates such as Indi Home and Riviera Garden when they were unable to buy units at H Cube, Mr Chow said. 'Buying confidence has been bolstered by the good atmosphere. We have not seen a project sell 80 per cent of units in two days for the past 12 months,' he said. The branch had received an increased number of general inquiries about flats for sale, Mr Chow said. Meanwhile, the Housing Department announced that the number of unsold inventory units and uncompleted units for presale fell 9.2 per cent to 59,000 in the fourth quarter from 65,000 the previous quarter. Ivan Ho Shiu-cheong, managing director at Ricacorp Properties, said the decline in housing stocks in the private residential market would ease market worries about oversupply. 'It will not cause an immediate big lift in home prices but it will at least have a positive psychological impact on the market,' Mr Ho said. With less market uncertainties, he said potential buyers would hasten their buying decisions, and in turn boost market sentiment.