HONG KONG, Nov 4: A steep fall in Hong Kong property prices aggravated by the recent stock market crash has unnerved home buyers, some of them willing to forfeit multi-million dollar deposits to scupper purchase deals.

``We've seen more than 10 cases these two weeks,'' senior manager of Ricacorp Properties Ltd's sales, Eric Cheung, on the ritzy south side of Hong Kong Island said.

``In one extreme case, the buyer forfeited a HK$3 million (US$387,500) deposit on a HK$30 million property,'' said Cheung, who specialises in the pricey Peak and Repulse Bay areas where a home can fetch HK$10 million to HK$30 million.

Most buyers who defaulted had run into snags arranging mortgages since the financial markets crisis, he said.

Home loans have become more expensive and difficult to obtain since the share market began to fall.

The monetary authorities defended the Hong Kong dollar against speculative attack two weeks ago with an interest rate hike. Prime lending rates rose 0.75 of a percentage point.

Many banks have also tightened their lending policy, fearing a property crash because of the recent stock market plunge.

Hong Kong's blue chip Hang Seng Index has dropped more than 30 per cent since early August.

In a city where a fifth of all adults invest in stocks, much of the population has lost tens of thousands of dollars in the slide, which intensified and turned into a crash two weeks ago.

A real estate agent, Amy Li, said nervous home buyers were choosing to lose their deposits rather than buy land that could soon be worth less than their loan if the property market crashed.

``There were several cases last week,'' said Li the manager at a branch of Century 21 Realty Agency Ltd in the trendy Mid-Levels district of Hong Kong Island.

``Buyers needed the money to deal with (stock market) margin calls,'' Li said.

They had signed preliminary purchase agreements before the stocks crash and were due to complete at the end of October.

A flat of less than 1,000 square feet (90 square metres) in Mid-Levels can be priced at around HK$10 million (US$1.29 million), but many people fear prices may now tumble.

Property analysts have said the fall in share prices will flow on to home values.

The head of regional property research at SBC Warburg Dillion Read, Franklin Lam said last week property prices could fall by 20 to 30 per cent in the next two months.``We see residential property prices correcting by 20 per cent but not more than 30 per cent,'' Lam said.

One property agent said prices had already slumped 10 per cent in the past seven days alone.

This followed from a decline in prices that was already happening because of a new policy to boost housing supply announced by the post-colonial government that took office on July 1, after Britain returned Hong Kong to China.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.