Luxury properties in prime locations include The Altitude in Happy Valley by Kerry Properties, Agenta in Seymour Road at Mid-Levels by Swire Properties, The Signature in Tai Hang by New World Development, Wing Tai Properties' new development at Coronation Terrace at Mid-Levels, and Soundwill Holdings' Park Haven in Causeway Bay.

The biggest suppliers are expected to be Sun Hung Kai Properties (SHKP), Cheung Kong and Sino Land.

SHKP is selling Chatham Gate in Hung Hom, while it will also put its new project at Tuen Mun station on the West Rail line on sale and phase one will provide about 1,000 units. Cheung Kong, now selling Festival City in Tai Wai, expects to release 3,500 to 4,000 new flats for sale this year, including a 1,720-unit project at West Rail's Tsuen Wan West station and LOHAS Park phase three comprising about 1,600 units in Tseung Kwan O.

Sino Land is expected to release more units in Providence Bay in Pak Sek Kok, while it is presently marketing The Coronation in West Kowloon, situated near the future Guangzhou-Shenzhen-Hong Kong Express Rail Link terminal.

Although new flats can still command a premium on secondary market values, developers are facing increasing pressure with fewer buyers. Pricing of The Coronation, at about HK$13,700 per square foot, is expected to continue the trend from late last year of being closer to the secondhand market. The project is a joint development of Sino, Nan Fung, K. Wah and Chinese Estates.

'Developers will not be as aggressive as before in pricing when they launch new projects for sale,' says Simon Lo, executive director of research and advisory for Asia at Colliers International.

'Many potential buyers are adopting a wait-and-see attitude, especially those in the secondary market. With concern about global economic growth and further upward pressure on the mortgage lending rate, the home market will feel the impact. Luxury home prices are likely to fall by 13 per cent as a result of the weakened sentiment.'

Lo adds that the leasing market is also feeling the chill with landlords cutting rents to entice tenants.

The sovereign debt crisis in the euro zone remains a thorny issue and there are concerns about the mainland's economic prospects. Hong Kong's economy is also facing a technical recession.

Thomas Lam, head of research for Greater China at Knight Frank, expects the residential market to see an overall correction of 10 to 15 per cent this year, though luxury home prices will fare better and slip by 10 per cent or less.

'The government may need to review its property cooling measures, such as relaxing the special stamp duty or easing credit restrictions, if things get worse,' Lam says.

The secondhand market is expected to face another challenging year. Homeowners are being advised to drop asking prices. At the same time, buyers are reluctant to commit to a market that they think could fall further. 'Sales activity is sluggish right now and the volume of transactions may fall further. There are many cash-rich home seekers, but they are waiting for a better moment to enter the market,' Lam says.

Policy risks will continue to be a key issue - not only for Hong Kong, but also the mainland and the world - as the United States presidential election campaign will be in full swing, while the mainland is expected to see a leadership reshuffle. Hong Kong will have a new chief executive and any change in housing policy will affect the market. Recent announcements suggest the government may be slowing the pace of residential land sales, but developers will need to prepare for tighter rules controlling the sale of new flats.