THE heady price rises that swept through Hong Kong's residential property market earlier this year must now seem a distant memory to many flat buyers. Already seven months into a market slowdown, sentiment is likely to be dampened further by last Friday's rise in interest rates. Major banks will increase their benchmark home mortgage lending rates by 0.75 per cent to 10.25 per cent from tomorrow. The increase was expected following last Tuesday's decision by the Federal Reserve to raise US interest rates by the same amount. Some real estate brokers are predicting that apartment prices, which have already fallen between 15 and 20 per cent since March, will drop another 10 per cent because of higher lending rates. Higher mortgage repayments are expected to be absorbed into the budgets of most existing home owners without too much difficulty, but for intending buyers, the rise has been viewed as yet another affordability obstacle. 'It is unlikely that anyone with an existing mortgage would be unable to afford the monthly repayments but mortgages in Hong Kong are getting more expensive and this is not good news for the market,' said Mark Noton, residential manager of Brooke Hillier Parker (BHP). Mr Noton said there were few indications the market would rebound in the near future. 'Buyers, sellers and investors are now getting used to the conditions in the secondary residential market,' Mr Noton said. 'People have adjusted to the market, and are now getting used to more realistic values.' The picture is also grim for real estate companies, which are already suffering from the lack of market activity. 'Large companies are in a better position to ride out these times but small property agents feel the drop in sales more acutely,' Mr Noton said. Current market trends are reflected in the latest BHP property survey. Prices for flats in North Point and Quarry Bay have dropped slightly in the past month, while an increase was recorded in Chai Wan. In the North Point survey the average asking price is now $6,316 per square foot, a 1.82 per cent drop on last month. At Taikoo Shing, Kornhill and Lei King Wan in Quarry Bay, prices fell by more than two per cent from $6,498 per sq ft in September to $6,363 per sq ft this month. Despite dipping in the past month, Quarry Bay and North Point flat values are still a long way ahead of the same time last year. The only monthly rise in last week's sample was at Chai Wan, where asking prices for flats in the Heng Fa Chuen and Perfect Mount Garden developments edged up 1.95 per cent to $6,428 per sq ft.
