A total of 266 people had applied for a government subsidy to cover their home-loan interest between June 29, when the scheme took effect, and last Friday.

Residents buying flats worth no more than 2.6 million patacas with a mortgage can apply for an interest subsidy of up to 4 per cent under the scheme. With mortgage interest rates currently at about 3 per cent, homebuyers can enjoy interest-free loans. Applicants must not currently own a flat and the government has set a quota of 4,500 beneficiaries.

People who qualify for an interest subsidy under the scheme can also apply for a credit guarantee by the government to make it easier for them to secure bank loans. The government would guarantee the repayment of 20 per cent of a flat's value.

A total of 132 people applied for the credit guarantee in the first two weeks after the scheme took effect.

Chiang Coc-meng, head of the Housing Bureau, said this week that the quota of 4,500 beneficiaries would be used up in a year, judging by the number of applications received so far.

'The number of applications meets our expectations,' Mr Chiang said. 'It shows that residents support the scheme.'

The official said the number of applications received in the second week was twice that in the first week, showing an increasingly warm response from the public.

The bureau has rejected three applicants who were ineligible because they were public-housing tenants.

Jimmy Yeung Long-ming, sales director of Midland Macau, said the daily volume of prospective buyers in the past two weeks had risen by 20 to 30 per cent from last month.

But he said it remained to be seen whether the subsidy scheme would boost transactions. 'The scheme has just started and we'll have to wait until later this year to see its effect.'

Most of the latest prospective buyers appear to be people in their 20s and 30s who are interested in flats worth about 2 million patacas in the North district, according to Mr Yeung. The descriptions fit in with the profiles of homebuyers hoping to benefit from the subsidy scheme.

Mr Yeung said a major rebound in the prices of second-hand flats had begun as early as April in anticipation of the scheme.

He said 'speculators stole a march and owners jacked up flat prices' in April and May before the government announced a date for launching the scheme.

Prices of flats in the secondary market are about 30 per cent higher than they were in January, returning to levels seen last July.

A weaker rebound was seen in the price of luxury flats, which are still far off their highs of last year.

Flats at La Cite, a new complex near the future bridge to Hong Kong and Zhuhai, fetched about 2,400 patacas per square foot last month, compared with about 3,500 patacas per square foot a year ago.

Several Macau lawmakers have expressed concerns that the scheme may inflate home prices and entice buyers into a trap of negative equity.

Lawmaker Jose Coutinho said the scheme was, in fact, making it more difficult for residents in need of housing to buy flats.

'It certainly pushes up property prices,' he said, adding that people rushing into the scheme might later find themselves in negative equity.

A property agent who declined to be named said a number of people had bought flats in April and May and were now preparing to 'sell' them to their children who were applying for the scheme.