HOME prices in the secondary market have bottomed out following recent adjustments but the primary sector could see further corrections, according to estate agents. Michael Choi Ngai-min, managing director of Land Power Property Consultants, estimated residential prices in the primary market had dropped about 20 per cent since March and by 20 to 22 per cent in the secondary market. Against a trend of rising interest rates and mortgage lending restrictions, agents expected residential prices to be flat and stable. Mr Choi expected to see a recovery first in the secondary market, now that the market was being driven more by genuine end-users instead of speculators and investors. But the primary market would feel more resistance to improvement once the Government's new restrictions on reselling flats before completion really took effect, he said. However, as many developers secured the consent of sale before the new government ban was announced, most residential developments being offered for pre-sale could still be resold before completion. Shih Wing-ching, managing director of Centaline Property Agency, agreed prices in the primary market were subject to some downward pressure. 'Developers are not really doing very well,' he said. 'They are not releasing more than 100 units at a time, whereas in the past they could release two or three blocks in one go and be confident they could sell out.' In the past few months, only about 600 to 700 new units were released by developers each month in the primary market, he said. If this trend continued, the territory could fall well short of its normal supply of about 30,000 new flats a year over the next couple of years, which would upset the Government's housing supply targets, he said. Augustine Wong Ho-ming, a director of Chesterton Petty, said the residential market would continue to be quiet and would not see a rebound in the near future. He said rising interest rates would not have a damaging effect on the market while tight mortgage lending policies remained the biggest barrier for home buyers. 'The market has accumulated a strong buying demand which will explode if the mortgage policies are relaxed,' he said. Mortgage lending would remain restrictive because banks were inclined to co-operate with the Government's efforts to control residential prices, he said. Wong Kim-bong, associate partner of Knight Frank Kan and Bailieu, said there was a sharp decline in demand from investors who bought homes for rental purposes or hedging against inflation. 'Buying residential properties now is no longer an easy tool to earn money,' he said. While rising interest rates could be a further dampener, China's high inflation rate meant the austerity programme was likely to continue - which would effectively restrict the flow of mainland capital into Hong Kong's real estate market, Mr Wong said. 'As Hong Kong's inflation is easing, the attraction of property has also decreased,' he said. 'With the approach of 1997, people, especially those who have plans to emigrate, will probably prefer to maintain their liquidity and will be reluctant to put too much capital in property.' Mr Wong said mass residential prices in certain areas, especially where a large number of new flats were put on sale, might see further adjustments. But the downside would be limited to five or 10 per cent at most, and home prices would grow in line with inflation or wage rises.