HONG KONG, NOV 5: Sky-high home prices in Hong Kong are set to plunge by at least 25 percent, while a drop in transactions could force thousands of property agents out of jobs, said analysts and industry sources on Wednesday.

Hit by a rise in mortgage rates and banks' tighter lending policies, property prices have fallen by an average of at least 10 per cent, and by 13 per cent for luxury units, from their peaks in August, analysts said.

``Prices will fall by 25 per cent compared to August over the next 12 months,'' BZW Asia property analyst Terry Ip said.

Another analyst with a European brokerage said prices of mass residential units would slide by 25 per cent within the next nine months, while luxury units would crash by some 30 per cent. Notorious for its high property prices, where cubbyholes can fetch US $ 1 million and home ownership is often a wishful dream, Hong Kong is bracing fora painful plunge.

A government plan to build 85,000 flats per year over the next 10 years which was supposed to boost home ownership, however, chilled the property market during the third quarter, analysts said.

The last straw came when interest rates surged in late October to fight off currency speculators assailing the Hong Kong dollar's peg to the American dollar. The rise in interbank rates has rippled through to mortgage lending rates. On Tuesday, Bank of East Asia Ltd said it was raising its mortgage rate to 12 per cent from 11 per cent. Higher interbank rates and the downward trend in property prices were cited as the reasons for taking this measure.

``Mortgage rates have gone up and...banks across the board have lowered valuation of properties to protect themselves from falling property values,'' BZW's Ip said.

``Banks are now more conservative and valuations (appraised value) will be even more conservative in future...as the prices have already fallen,'' said Lanbase Surveyors Ltd director Chan Cheung Kit.

The property slump, which analysts say will hold out for atleast the next 18 months, has already eaten into transactions.

Estate agents, who used to cover their windows with signs showing how real estate prices were going up are now posting messages of doom. ``Great bleeding price,'' one sign said.

The offer price on a 400-square-foot apartment had been slashed from HK $ 4 million (US $ 517,500) to HK $ 3.8 million (US $ 491,600). ``Overall transactions in the last two weeks have dropped by 30 to 40 per cent when compared to the transactions conducted during the first half of October,'' according to William Fung, managing director of Midland Realty Ltd.

The immediate victims of the property price crash would however, be the 25,000 property agents in Hong Kong, said Fung, who is also vice chairman of the Society of Hong Kong Real Estate Agents. ``If this sort of sluggish market continues for the next three months'' some 30 per cent of the agents would be forced out of their jobs, Fung said. He added that those agents working for small to medium firms would be among those who would be hurt the most.

Other agents were now downsizing their operations, he said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.