The surge was powered by a combination of low interest rates, limited supply and growing confidence in Hong Kong's economic recovery, according to a housing index compiled by Centaline Property Agency.
It said its Centa-City Leading Index showed that Hong Kong housing prices have surged since the end of 2008, nearing the heady levels of 1997 just before the crash caused by the Asian crisis.
Home prices last month reached a level equivalent to 78.7 per cent of the 1997 peak, the agency said.
The index records the weekly price increase for second-hand home transactions by Centaline Property.
"Prices in large housing estates will continue to rise, with some major housing estates such as Taikoo Shing possibly surpassing the 1997 level this year," Wong Leung-sing, Centaline's associate director of research, said.
The rise came despite a government pledge to monitor housing prices in the city.
In a bid to prevent an asset bubble, the government announced a series of measures to stabilise the property market in the 2010-11 budget.
But Wong sought to play down fears of a market collapse.
"Even if prices have surpassed their 1997 levels, it does not mean that the property market will implode," said Wong, citing lower affordability ratios and limited supply as factors that would continue to support the sector.
The affordability ratio - that of mortgage repayment to household income - is just 36 per cent, Wong said.
The ratio is much lower than the peak of 65 per cent in the second quarter of 1997 quoted by the Hong Kong Monetary Authority. The Rating and Valuation Department expected private residential completions to total 14,260 units this year and 10,960 next year.
The figures are nearly double those of last year, but still significantly lower than the average of the past 10 years.
Measures to boost home supply will not take effect for at least a few years. The 46 residential sites on the application list will only provide about 9,000 flats.
With favourable factors such as low interest rates and a limited supply of new units, there should still be room for residential prices to rise further in the coming months, property agent Knight Frank said in a recent report. But not everyone is upbeat about the market.
"I would not describe the market as healthy," said Michael Wu, a director at Fitch Ratings, adding that buyers were becoming suspicious of rising house prices.
Meanwhile, property agent Ricacorp Properties said a total of 12,593 property purchases were lodged with the Land Registry last month - including housing, retail and office units - a decline of 6 per cent from February.
The Land Registry will announce the official March figures next week. — South China Morning Post
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