Hong Kong's mortgage lending cooled in June, reflecting the sluggish property market, and market watchers expect the figures to cool further in the coming months.

Residential mortgage lending is a gauge to the city's property market. According to the latest figures released by the Hong Kong Monetary Authority (HKMA), the number of new mortgage loans drawn down last month fell 3.1 percent, compared with May, to HK$16.7 billion.

And while the number of new loans approved jumped 3.1 percent to HK$22.1 billion, the number of applicants fell by 11.6 percent, to 13,872.

The new loan approvals in primary market transactions dropped to HK$2 billion, down 17.6 percent from May - a HK$400 million decline.

Mortgage-loan approvals in secondary market transactions rose HK$1.1 billion, or 7 percent, to HK$16.2 billion. Refinancing also rose to HK$3.9 billion.

But Patrick Chow, a research head for Ricacorp Properties, said that these are delayed figures revealing the property market's performance about a month earlier, and substantial drops are expected in the coming months.

"The number of transactions dropped sharply in the past two months," he said. "The mortgage-loan figures in July will show the picture."

He expects the number of new loan approvals in secondary market transactions to post a month-to-month drop of 50 percent in July, with a 70 to 80 percent drop in new loan approvals in primary transactions. Chow also noted that the traded residential units were valued at a mere HK$1 million to HK$2 million.

"The value of transactions has contracted," he said. "Neither end-users nor investors have been willing to put too much money into the property market recently."

He said the property market will remain dimmed in August, as property developers aren't intending to launch new residential projects during the Olympic Games. For the secondary market, Chow said the summer is traditionally a slow season.

He expects the residential market to recover in September.

"When vendors find that the market is undergoing a correction, they are willing to reduce their asking prices," he explained. "And buyers come back."

(HK Edition 07/26/2008 page2)