Numerous investment gurus, economic analysts and commentators have predicted the demise of the Hong Kong property market. But property prices have continued to defy gravity - despite the projected slowdown in economic growth in coming months and the expected rise in unemployment in the troubled retail and tourism sectors.

The latest government figures show that residential property prices at the end of July rose 4.28 percent from a year earlier, a significant slowdown from the 18.92 percent year-on-year increase in July 2013. This has prompted several market analysts to forecast a price slump of as much as 40 percent in 2016, notwithstanding the 82 percent year-on-year increase in sales in August.

If that were the case, then nearly all those homebuyers who financed their purchases with mortgage loans in the past two years would find themselves falling into the nightmarish trap of negative equity. They would have to face the dilemma of whether to default or to keep on throwing good money into souring assets.

This was the dilemma confronting many homeowners in the great property crash following the outbreak of the Asian financial crisis in 1997. But although property prices have risen to levels far exceeding those before the 1997 crash, the economic fundamentals now are very different from what they were then.

It is widely known that easy credit has been fueled at least partly by the loose monetary policy pursued by the United States since the 2008 crunch. Exceptionally low bank interest rates have been driving up asset prices in Hong Kong and many other markets around the world.

In Hong Kong, the upward pressure has been further reinforced by the tight supply of land and the inflow of overseas capital, particularly from the mainland.

Various administrative measures seeking to dampen the property price surge have produced limited results; the price of an average apartment has more than doubled in the past couple of years.

Many economists have said that the market is poised for a sharp correction because prices have gone to levels fewer and fewer Hong Kong people can afford. They noted that the impending increase in US interest rates, combined with the projected increases in supply, could whip up a "perfect storm" that could send the Hong Kong property market into a tailspin in 2016.

But many prospective home buyers appear to remain unfazed. There is no indication that buyers are holding back or owners are in a hurry to sell.

The US Federal Reserve has been talking about raising interest rates for more than a year. But nobody believes that it will raise rates anytime soon because of the fragile economic recovery in the US and the economic slowdown on the mainland.

To be sure, the Hong Kong government is working hard to increase supply. But it is a long-term endeavor, the impact of which will not be felt in the few years ahead. There is not going to be a sudden gush of supply that can upset the apple cart.

As such, talks about a property market crash with prices plunging 30 to 40 percent seem premature.

(HK Edition 09/10/2015 page6)