Hong Kong’s home prices rose at a faster pace in July as eager homebuyers returned to the market in droves. The Rating and Valuation Department’s monthly price index for private homes was at 281.4 in July, an increase of almost 1.9 per cent, faster than the 0.2 per cent growth seen in June. It was the fourth consecutive monthly increase, bringing the accumulative rise to 3.68 per cent. The latest home prices are now 8 per cent lower than their peaks in September last year, according to government data. The rental index rose 1 per cent month on month in July. In the mortgage market, the Hong Kong Monetary Authority on Wednesday said the number of mortgage applications in July increased month on month by 4.4 per cent to 10,281, while mortgage loans approved in July grew 2.7 per cent to HK$22.9 billion. Mortgage financing for first-hand homes fell 1.4 per cent in July to HK$4.6 billion, reflecting the innovative financing methods offered by developers. Still, home prices may have more room to drop due to a combination of bleak economic outlook, potential interest rate rise next month and an ample pipeline of new apartments about to come on the market. Nomura Holdings on Tuesday said in a report that it expects the city’s residential property prices to fall a further 10 per cent in the medium term, without giving a more specific time frame. UBS’ head of China and Hong Kong property research Eva Lee said: “Some pent-up demand has been released after developers offered incentives such as discounting and cash rebates to lure buyers.” She believes the market is still heading downwards due to the fundamentals – an increase in supply and the slowing local economy. “Prices will continue to fall but at a slow pace and the downward cycle will be longer than expected,” said Lee. In September last year, UBS had predicted the city’s home prices could fall as much as 30 per cent till the end of 2017. Hong Kong home prices have jumped more than 350 per cent since 2003 when the city was in the grip of the Severe acute respiratory syndrome outbreak. Lee said the market would be soften in the fourth quarter when more projects were completed. Private housing completion is expected to reach between 17,000 and 20,000 units this year, compared with fewer than 10,000 units in 2013, as the government bolstered land supply to make housing more affordable, according to Bocom International Securities’ estimates. The scarcity of ready tenants is also weighing on the decision by landlords to hold on to their investments. “When you fail to find a tenant, you will reconsider if you should hold on to the apartment to wait for prices to appreciate or sell now to take profit,” said Lee. More homebuyers are rushing back into the market. Sun Hung Kai Properties , Hong Kong’s biggest developer, received 16,700 applicants for its residential project Grand Yoho in Yuen Long and managed to sell 308 units on the first day of launch on August 27. Taking advantage of buoyant sentiment, developers are in a rush to offload their property, with about 1,000 units coming on to the market on September 3. A further 228 units of Grand Yoho will be available, while Chinachem Group will put up 535 units at Papillons in Tseung Kwan O. China Overseas Land & Investment will launch 300 units earmarked for Hong Kong’s permanent residents only, at One Kai Tak, the site of the city’s former airport. This article has been amended to say Eva Lee is a research head at UBS, not Nomura