Hong Kong: Hong Kong's newly approved mortgage loans fell 22 percent in September from August, the most since December 2008, after the government introduced measures to avert a property bubble.

The total value of newly approved loans declined to HK$31.6 billion (Dh15.07 billion), the Hong Kong Monetary Authority said today on its website. The amount of loans which had previously been approved and were drawn down in the month rose 2.4 per cent in September from August to HK$33.9 billion, according to the city's de-facto central bank.

Boost for supply

The government has since August raised down-payment ratios, stopped offering residency to foreigners who buy property in the city, and increased land auctions to boost supply. Sales of new homes doubled in October, and property prices have surged about 50 per cent since the beginning of 2009 on record-low mortgage rates and an influx of wealthy mainland Chinese buyers.

"This is just a lagging indicator that reflects the measures in August," said Nicole Wong, a property analyst at CLSA Ltd. in Hong Kong. "We've seen gains in both transaction price and volume in the home market in October, and we expect prices will rise faster than we expected next year."

New home sales volume more than doubled to 1,319 in October from September's 524, Centaline Property Agency Ltd, the city's biggest privately held real-estate broker, said in a release yesterday.

The Hang Seng Property Index, which tracks the city's seven biggest developers, has gained 13 per cent this year, compared with an 8 per cent increase in the benchmark Hang Seng Index. The property index was up 2.7 per cent at the 4pm local time close of trading yesterday, its biggest advance in almost two months.

Significant price gains

HKMA chief executive officer Norman Chan told lawmakers in Hong Kong that the home market is overheating and has posted "significant" price gains in recent months.

"Initial data in October seems to show that the home market is active again," Chan said.

He cautioned that buyers should consider affordability because interest rates in Hong Kong cannot fall further. Hong Kong rates tend to follow those in the US because the local currency is pegged to the US dollar and Hong Kong will maintain this currency peg.