Sales at 10 of Hong Kong’s biggest private residential developments fell 58 percent at the weekend from a week earlier after the government raised minimum down payments and deposits for foreign buyers.

Seventeen transactions took place, according to Centaline Property Agency Ltd., the city’s biggest privately held realtor, after the Hong Kong Monetary Authority on June 10 said buyers of homes costing more than HK$6 million ($770,000) will have to increase up-front payments. Foreign buyers must deposit an additional 10 percent.

The measures to curb property prices that have surged about 70 percent since the beginning of 2009 may further dent buyer sentiment that is already showing signs of weakening following a recent drop in home deals and as banks accelerated mortgage interest rate increases this year. It was the government’s fourth attempt since October 2009 to curb inflating residential values, rated by Savills Plc as the world’s most expensive.

The measures “show the government’s determination to hold prices at their current level,” said Lee Wee Liat, a property analyst at Samsung Securities Ltd. in Hong Kong. “It may signal they will take more significant steps and that’s to limit the number of units foreigners or mainlanders can buy in the city.”

The seven-member Hang Seng Property Index dropped 1.2 percent as of 10:15 a.m. in Hong Kong trading to the lowest since Sept. 1, 2010, compared with the 0.8 percent decline in the benchmark Hang Seng Index. (HSI)

Property transactions fell for a fifth straight month in May. Still, home prices gained 1.3 percent in the week ended June 5 from the previous seven days, according to Centaline.

‘Picking Up’

The curbs “came at the right time as there are signs suggesting prices may take off, as sales activities of new homes in recent weeks have been picking up again,” Lee said.

Properties costing HK$10 million or more will require a 50 percent down payment, HKMA Chief Executive Norman Chan said on June 10.

“These new rules will have an immediate impact,” said Jeffrey Ng, a senior executive director at Hong Kong Property Services Agency Ltd., a unit of Midland Holdings Ltd., Hong Kong’s biggest publicly traded realtor. “It will slow down the pace of those who’re looking to buy properties.”

Borrowers whose income is primarily from outside Hong Kong will need to make a higher down payment unless they can demonstrate a “close connection” to the city such as evidence that they work for a local employer or that an immediate family member resides in Hong Kong, the HKMA said in a statement.

‘Need Time’

“This will definitely affect our clients from both overseas and mainland China,” said Louis Chan, managing director for residential properties at Centaline. Chan predicted home transactions will slow by about 10 percent to 20 percent over the next few weeks “as potential buyers need time to adjust to the new rules,” he said.

Buyers from overseas and other Chinese cities accounted for about a third of luxury home transactions in the first quarter of this year, according to Centaline.

Prices may drop 10 percent to 20 percent in 2012 and a further 10 percent in 2013 on rising rates, Andrew Lawrence, a Hong Kong-based analyst at Barclays Capital, said last week.

That may be good news for Joseph Hau, a 38-year-oldinvestment adviser who is looking to move to a bigger apartment with his six-month pregnant wife. Hau lives in a 500-square foot apartment in the Wan Chai district.

‘Wait a Little’

“We’ll probably wait a little and see whether prices will come down,” said Hau on June 11 outside a strip of property agencies in Tai Koo Shing, a middle class residential development in the Island East district on Hong Kong Island.“We’ve been negotiating with the owner for a couple weeks and he’s been quite hard. Maybe after these new rules he’ll change his mind.”

Before the latest measures, the HKMA on Nov. 19 increased stamp duties on homes sold within six months of purchase and mandated higher down payments on those costing HK$8 million or more.

The city also has pledged to boost land supply amid public protests that housing prices are becoming unaffordable. In the latest land auction by the government on June 9, Cheung Kong(Holdings) Ltd., controlled by billionaire Li Ka-shing, agreed to pay HK$11.65 billion for a site on Borrett Road, about a 10-minute drive from the Central business district. The price was equivalent to HK$26,763 per square foot, said Centaline.

“Although the property market cooled down a bit in March and April this year, there are now signs of renewed exuberance following high transaction prices recorded in recent government land sale auctions,” HKMA’s Chan said. “The property market has been volatile” since November.