IT IS ALMOST FIVE YEARS since the asset-price bubble burst, but the property market is still reeling.
Belief in an early recovery has repeatedly been misplaced, the gloom punctuated only by weak, short-lived rebounds and continuous government efforts to breathe life into the sector.
With the prospect of more job losses, home-buying appears to have lost momentum in the near-term, despite historically low interest rates.
At the same time, the weak economy is expected to continue undermining demand for offices.
Government figures show office rents are nearly 50 per cent below the 1997 peak, while the accumulated slump in average home prices is approaching 60 per cent.
The hard-landing in property prices has caused considerable pain over the past few years.
Property giants have made heavy provisions for the falls in value and bad assets, while smaller or highly geared companies have had to part with assets or surrender to creditors' demands.
In general, the evaporation of asset wealth and the subsequent problem for property owners of negative-equity have intensified bad sentiment towards the market.
Property transactions have plunged, and with prices continuing to fall, fewer home-buyers will dare to come forward.
The office market seems in an even more untenable position than the residential market, and its prospects are no less gloomy.
At the end of last year, overall vacant office space (including grades A, B and C) stood at 1.01 million square metres, or 11.1 per cent of stock, while overall take-up was an anaemic 2,800 square metres for the year.
These figures indicate a serious imbalance between demand and supply. Expected completions this year of 171,000 square metres, and 312,000 sq metres next year, will add to the market's woes.
Corporate retrenching, aggravated by the high-technology bubble burst early last year, triggered a rapid contraction in demand for office space, leading to a precipitous fall in rents and prices.
'Demand is very weak and activity has been slow in the first two quarters this year,' says Alva To Yu-hung, director of research at DTZ Debenham Tie Leung. 'Office rental will, for some time to come, continue to be under downward pressure.'
John Saunders, head of regional property research at CLSA, says: 'I don't see office rents improving in the next 18 to 24 months.'
The Government continues to make efforts to revive the housing market. In mid-June it announced a reduction in future supply of Home Ownership Scheme units. Chief Secretary Donald Tsang Yam-kuen has also just announced plans to control land grants connected with new railway developments.
Mr Saunders says: 'The Govern-ment has done pretty much all in its power on the supply side [to prop up the residential market]. In future, the market will be driven predominantly by end-user demand, although a reasonable case can be made out of investment demand too, given the attractive rental yield relative to bank deposit rates. But speculative demand will be out.'
He thinks the unemployment situation has to improve first before the market can turn towards a recovery.
'Even though it is cheaper now to buy than to rent, people are focusing on their job prospects rather than on their savings.'
Shih Wing-ching, managing director of Centaline Property Agency, has a similar view.
'Annual price declines in the mass residential market nar rowed to about 10 per cent at the end of 2001 from over 20 per cent for the previous two to three years.
Prices seem to have hit bottom now on the back of rising transaction volumes.
'Many young people can afford to buy their first homes at current price levels. Low interest rates are a help too. But for demand to pick up significantly, a better performing economy is a prerequisite.'
Improvement on the economic front, in turn, depends to a great extent on whether Hong Kong can successfully re-invent itself to regain competitiveness in the region.