HONG KONG (Reuters) – Hong Kong property sales fell by almost 40 percent in the first half of the year, according to government data released on Wednesday.

There were 26,571 sale and purchase agreements worth HK$189.49 billion ($24.42 billion) in the six months to the end of June, according to the Land Registry, declines of more than 39 percent in both volume and value compared with the same period last year.

The volume decline is the worst in at least 11 years, based on limited data posted on the Land Registry website. The value decline is the worst in a decade. Consultant estimates placed the figures as the worst in between 15 and 26 years.

High rise residential flats are under construction in the southern city of Shenzhen neighboring Hong Kong, China September 11, 2015. REUTERS/Bobby Yip

A decline was expected – and the first half of 2015, which is the comparison, was particularly strong. But the decline is still significant in a city where property-related businesses account for about a fifth of the economy.

Half-year economic data will not be published until next month but Hong Kong’s economy contracted 0.4 percent in the first quarter, its first contraction in nearly two years.

Property sales in the first half were hurt by increased U.S. interest rates, fluctuations in the stock market and deprecation of China’s renminbi, said Thomas Lam, head of valuation and consultancy at Knight Frank.

The market improved somewhat in the second quarter, however, and the slowdown would affect estate agents more than the economy, he said. He also said the further slowing of mainland China’s economy could drive more home sales in Hong Kong.

“There will be more and more Chinese buying property in Hong Kong or overseas for wealth protection,” he said.

Separate Hong Kong data from the Rating and Valuation Department showed modest month-to-month increases in home prices in April and May and a slight increase in home rental prices in May.

It is not clear how long the improvement will last.

The number of homes worth less than the amount paid for them has skyrocketed this year. There were 1,432 such homes at the end of March, worth $4.9 billion ($631 million), the highest amount since the global financial crisis in 2009. That is up from just 95 cases worth HK$418 million at the end of December.

Last month, Credit Suisse said aggressive mortgage plans backed by developers could stoke short-term gains but actually signalled that the quality of primary property sales was deteriorating.

The bank said it expected prices would continue to come under pressure from rising supply and a slowing economy.

Developer Henderson Land Development Co Ltd has been advertising mortgages of up to 95 percent of the value of certain properties while Sun Hung Kai Properties Ltd has advertised loans worth 120 percent.

(Reporting by Clare Baldwin, Lindsy Long and Sharon Shi)

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