In a research note titled "bubble trouble" released on Monday, Andrew Lawrence, head of Hong Kong Property Sector from Barclays, said liquidity continues to expand the Hong Kong property price bubble but the cycle is becoming increasingly unstable. Lawrence expects a major price correction starting from 2013.

"Further property price rises are likely to induce additional government measures to choke off liquidity and force supply on first-time buyers, who can ill-afford current prices."

"Most investors see the property bubble - but at the same time have been compelled to invest in it, (so) we believe, (and are) confident (that) they can get out before it bursts," Lawrence wrote.

Another research report by RICS released on Monday also indicated that end-user home buyers in Hong Kong will likely adopt a wait-and-see approach in anticipation of a drop in property prices. The government in late October revamped new Special Stamp Duty (SSD) on short term home resales and introduced Buyers' Stamp Duty (BSD) that slapped an unprecedented 15 percent tax on home buyers who were not permanent Hong Kong residents.

Although home prices are unlikely to drop in the short term due to the reluctance of home owners and developers to lower prices to dispose of them in unfavorable market conditions, RICS stressed that only an increase in the housing supply or a major deterioration in credit conditions could trigger a significant turnaround in home values these days.

On Friday, Government Economist Helen Chan said residential prices had risen about 20 percent in the first nine months of this year, surpassing the previous peak in 1997 by around 26 percent. She too had stressed on a mounting risk of a property bubble in the city.

(HK Edition 11/20/2012 page2)