Signs on the ground point to a clear pick-up in demand from local and mainland Chinese buyers, thanks in part to steep discounts offered by developers to offset higher stamp duties imposed to cool prices that have jumped 120 per cent since 2008.

The boom was fuelled in large measure by the US Federal Reserve’s dollar-printing campaign, or quantitative easing, to drag the US economy out of the global financial crisis.

It became easy to borrow cheaply, and with Hong Kong’s currency pegged to the US dollar, the effects of the policy were easily transmitted to the property market.

But now some analysts expect property prices to fall, as the Fed is expected to start withdrawing its monetary stimulus some time during the coming months.

Regardless, many home buyers, like Lee, have shrugged off recent forecasts of a drop of up to 50 per cent in prices over the next 12 months and decided to take a chance.

“You see that people who earn less than you have caught up with you because they bought then. It’s like a girl you liked got married,” Lee said.

Last weekend, long queues at one project prompted developer Hang Lung Properties to postpone presales and change the first-come, first-serve rule to a ballot system, in which more than 400 buyers competed for just 80 units priced from HK$8 million to HK$15 million.

Industry watchers said up to 30 per cent of buyers at recent popular projects were mainland Chinese, whose presence in the new luxury home market had fallen to less than 12 per cent from 43 per cent after cooling steps in October last year.

“With stamp duty subsidies from developers, many Chinese buyers are attracted back to the market,” CLSA property analyst Nicole Wong said, referring to a 15 per cent tax on foreign buyers that many believe was targeted at mainland Chinese.

“It’s like there is no government tightening at all – developers cancel it for the Chinese buyers.”

In another sign of strong demand, new home transactions rose to a six-month high in September, according to Centaline Property Agency.

Some analysts say the recent frenzy has also been spurred by people rushing in before expected interest rate increases, which could lead to a collapse in Hong Kong’s property market.

“They [buyers] are concerned that the banks will further tighten up credit,” said Jennifer Wong, tax partner at global accounting firm KPMG in Hong Kong.

“This is one of the reasons they don’t mind paying a little bit more – they can secure the mortgage loan at a low interest.”

Almost everything hangs on when the Fed decides to taper, as a rise in US interest rates would drive up borrowing costs in Hong Kong, where home prices have risen 4 per cent over the past year on ultra-low interest rates, tight supply and abundant liquidity since cooling measures were imposed.

While the picture on the ground looks promising, analysts see property prices undergoing a sharp correction.

Deutsche Bank forecast last month that Hong Kong home prices could drop up to 50 per cent in the next 12 months, while Barclays said the market will enter its first real downturn since 1998 with a 30 per cent plunge by 2015.

“The developers created this ‘wow factor’. They managed to draw out some people who wanted to buy and were looking for price cuts,” said Barclays property analyst Paul Louie, citing two recent projects that offered discounts of up to 40 per cent.

“We are just seeing the beginning of the round of price cutting. There will be more to come,” he said. “The buyers will return to the sidelines and wait for better deals.”

The price difference between new launches and second-hand homes – an indicator of developers’ profitability – dropped to its lowest since 2003 at 12 per cent in the third quarter, according to real estate company Midland Realty.

Wong Leung-sing, research director at Centaline, said the buyers, rather than the analysts, would be proven correct about the price trend.

“We can’t find the factors that will lead the market to plunge,” Wong said. “Investors are still quite optimistic.”

More than 5,000 small to medium-sized units will be released by developers such as Cheung Kong and Sino Land in the first quarter of next year, pushing inventory of new homes to a 10-year high and posing what Wong called “a real test” of mass consumers’ purchasing power.

“The day of reckoning will be decided by the middle class,” Wong said.

Amid forecasts of a collapse in the property market and general gloom over the outlook for home prices, there are still some who say the worst is over.

“The government tightenings just pushed back the timing of the purchase for Chinese buyers,” said Patrick Chau, director of residential sales at property consultant Savills.

“You can never suppress the demand from that market.”

Some developers are also upbeat, prompting them to start scaling back some of the incentives previously on offer.

The city’s largest developer, Sun Hung Kai Properties, raised the price of a high-end project in Kowloon West by up to 10 per cent after a strong market response – it received over 2,000 applications for a relaunch of 60 units.

With the city’s healthy 54 per cent loan-to-value ratio, the absence of an immediate interest rate increase, and strong purchasing power from end-users and investors, Chau expected home prices to rise a further 5 per cent by the second quarter of next year.

“Here, at the front line of the market, we don’t see the correction that investment banks are talking about,” he said.