The International Monetary Fund has warned of the risk of ample liquidity and credit fuelling the property market in Hong Kong.
It says measures may be necessary to ensure banks manage risks prudently and curb any escalation in housing prices.
'There is a risk that prices could become driven more by short-term liquidity conditions, divorced from fundamental forces of supply and demand,' Nigel Chalk, the fund's mission chief for Hong Kong, said in a conference call from Washington.
But there were no indications yet that rising luxury property prices were affecting mass housing, he said.
'We welcome the consideration that is now being given to increasing the supply of land to the market as one of the possible means to help moderate potential property price surges,' Chalk said.
The fund yesterday released its preliminary conclusions on Hong Kong after visiting the government and private-sector representatives in the city two weeks ago. The IMF lifted its forecast for Hong Kong's economy this year and next by 1.5 percentage points. It said the economy was expected to contract 2 per cent this year but expand 5 per cent next year.
The government's projection for this year is a contraction of between 3.5 per cent and 4.5 per cent.