Transactions in Hong Kong's secondary residential market have dropped by more than half after local banks raised interest rates last week, according to data from Centaline Property Agency, one of the city's biggest real estate agents.

Sales in the 10 most active mass-housing estates plunged 55 percent during Saturday and Sunday compared with the previous weekend, with only 35 apartments having changed hands.

Property transactions in Hong Kong are typically more active during the weekends.

Developers also tend to launch their new projects during the weekends.

Many potential buyers have postponed their home buying plans as they are pondering the impact of rate hikes on them, said Patrick Tsang, a district manager of Centaline.

Hong Kong's three biggest housing loan providers, HSBC Corp., Hang Seng Bank Ltd. and Bank of China Hong Kong (Holdings) Ltd., raised their prime rates to 5.75 percent from 5.25 percent, effective Monday. Some other banks raised their prime rates even higher.

The Hong Kong Monetary Authority (HKMA) announced the biggest adjustment yet to the 21-year-old currency peg by allowing the local unit to trade in a wider band against the U.S. dollar.

In addition, the regulator set for the first time an upper limit of HK$7.75 (US$0.99) to defend the currency peg to the U.S. dollar. By doing this, the HKMA aims to damp future bouts of upward pressure on the Hong Kong dollar.

Sales in the secondary market have been slowing down in April on expectations that local interest rates are headed higher.

Buggle Lam, chief analyst at Midland Realty, estimated transactions in the secondary market had fallen to about 8,500 in April, compared with 13,500 as shown by government statistics in March.

Concerns on rate hikes have already been weighing on the market since the start of second quarter,?¡À said Lam. The 50 basis point hike in local rates last week just help in closing the gap between Hong Kong and U.S. rates, which is just a matter of time.

Lam said secondary property prices had risen about 6 percent so far this year. He expected transactions would continue to slow down in the next few months, but maintained his view of a 15 percent rise in prices for this year.

Editor: Yan