"Buying interest has returned because home prices have shown no sign of falling further, despite the austerity measures in place to rein in the market."

The increase in demand was also due to the growing belief among buyers that the new leadership would not introduce further measures aimed at bringing home prices down.

In the primary market, Luk said that in suburban locations flats of about 100 square metres and priced around 2 million yuan (HK$2.47 million) were in greatest demand. In the secondary market, December sales rose 21 per cent on the previous month to a three-year high of 23,977 deals, according to data compiled by Centaline.

In three districts - Honghou, Huangpu, and Qingpu - the increase was above 30 per cent.

Shui On Land's Rui Hung Xing Cheng in Honghou, in the northern part of the city, was one of the projects that benefitted from the resurgence of buying interest.

Prices for flats in the phase-five release of the project last month reached as much as 46,000 yuan per square metre, Shui On chief executive Freddy Lee Chun-kong said after 90 per cent of 360 flats sold on the first day. The developer plans to release the next batch of six residential towers in the first quarter.

In 1998, flats sold in the first phase of the development fetched about 7,000 yuan per square metre, according to agents.

The project will eventually have 1.7 million square metres of gross floor area, including 500,000 square metres of office, retail and hotel space.

Luk said flat prices in the project were likely to rise once all the commercial space was completed.

"It will add value, as the development will become a landmark in the district," he said.

Agents said Hongkongers had bought about 6 per cent of the nearly 4,300 flats sold since 1998.

Last month, a three-bedroom, 143 square metre flat sold for 6.5 million yuan, while a two-bedroom, 90 square metre flat sold for 4.5 million yuan, according to agents.