Hong Kong's property market is overheated and is at risk of heading into a correction because of the increasing macroeconomic uncertainty, Acting Government Economist Andrew Au said on Friday.

"Although the property market has somewhat calmed down, mass residential home prices at the end of June still exceed the 1997 historical high level by 7 percent , so there are risks in regard to a price adjustment," Au noted.

Hong Kong, home to the world's most expensive residential and office properties, has seen home prices rise 14 percent in the first half of 2011, surpassing records in 1997 amid a low interest-rate environment, strong economic growth, tight land supply and an influx of mainland home buyers.

However, Au predicted home pricews in July may decline slightly due to recent government's measures including increasing land supply and lowering the loan-to-value (LTV) ratio for home mortgages to cool the red-hot property market. The LTV is the percentage of a property's value that is mortgaged.

The local home affordability ratio, the ratio of homebuyers' median income used to repay mortgage loans, slightly decreased to 47 percent and this suggests that local homebuyers' burden of repaying mortgage debts has alleviated somewhat.

Hong Kong home prices rose 0.42 percent in the seven days ended August 7 from a week earlier, according to Centaline Property Agency Ltd. The Centa-City Leading Index, an indicator of housing prices in the city, gained to 99.53, according to a statement posted on the company's website on Friday.

(HK Edition 08/13/2011 page2)