HONG KONG: Hong Kong home prices rose the most among the world's major housing markets last year, according to property adviser Knight Frank LLP, adding to signs that the city may face a property bubble.

Average prices climbed 33 percent, outstripping increases of 22 percent in Israel and almost 16 percent in Norway, a global index compiled by the London-based broker showed. Prices advanced in 20 of the 37 national markets covered by the index.

Low interest rates and government efforts to stimulate economic growth helped halt or slow the slide in property prices across the globe. The surge in Hong Kong values, powered by demand from mainland Chinese, led the International Monetary Fund in November to urge government steps to cool the market.

"It's not just property markets that have succumbed to this exuberance - equities and commodities have seen prices pushed up sharply over the past 12 months," said Liam Bailey, head of residential research for Knight Frank, adding that, "In Asia, new booms are developing in Hong Kong and areas of China's more go-go eastern seaboard cities."

Hong Kong Chief Executive Donald Tsang said in his annual policy address in October that rising prices have caused concern about a possible property bubble. He told lawmakers last week that there is no "obvious bubble".

While the US has returned to more sustainable levels, prices in Ireland, Spain and the UK are still 15 percent to 30 percent above affordability levels based on average incomes, Bailey said.

Dubai was the worst-performing market in terms of prices, sliding 42 percent, followed by Bulgaria and Ireland.

Bloomberg News

(HK Edition 01/20/2010 page4)