Private domestic price index of local properties saw the largest monthly fall in 10 years in October. The index slid 7.3 percent to 112.3, according to the latest statistics released by the Rating and Valuation Department.

The index has dropped for four months straight from 124.9 in July. The decrease was as much as 9 percentage points or 7.3 percent between September and October, the biggest monthly drop since 1998.

Small- and medium-sized flats in urban districts saw the heaviest downward correction during the period, losing 9.2 percentage points month-on-month.

Meanwhile, the private domestic rental index has been tapering off from its peak of 121.7 in August to 113.1 in October, losing 8.6 percentage points.

The price index dropped to 107.8 in October from 115 in September in terms of selected popular developments, while the index for urban properties went down by 9.2 percentage points to 116.5.

Property agencies are generally pessimistic about the outlook of the rental market in 2009.

Patrick Chow, head of research at Ricacorp Properties, said that residential rentals are expected to drop further in 2009.

"With the bearish market sentiment, many sellers chose to retain their properties for lease rather than selling them at a cheap price," he said. "However, they are expected to reduce their asking rents to attract new tenants."

As a result, the monthly drop of the rental index will stand at 7 percent to 8 percent next year, but he figured the price index had already hit the bottom.

Charles Chan, managing director of property valuation and professional services at Savills, noted that supply in the rental market has soared notably amid the decline of residential prices. Along with the weakening market demand, he predicted, the rentals will continue to fall next year.

"The drop might ease off in the second half, but it depends on the recovery of the external economy," he said.

However, Centaline Property executive director for residential market Louis Chan pointed out that overall transactions and average price showed a sign of rebounding last month. He therefore expected the market as a whole to be back on track next year.

The Land Registry earlier last week announced that sale and purchase agreements for all types of building units received for registration in November was 3,786, down 37.5 percent month-on-month.

(HK Edition 12/06/2008 page2)