Investors and speculators bought $60.15 billion worth of properties during the first half of this year - surpassing the amount recorded for the whole of 1996, according to figures released by Jones Lang Wootton (JLW).
Grade A office space accounted for almost half of total sales while residential and retail sales accounted for an equal portion of the remainder, said JLW Pacific director Michael Chan Sing-fai.
JLW's figures included only deals worth $50 million or more.
Mr Chan said Hong Kong buyers accounted for about 50 per cent of the deals while mainland purchasers bought about 25 per cent, mostly office space.
The rise in investment business during the first half of the year was due in part to a surge in mainland investment and overseas buying, he said.
Beijing's gradual easing of its tight money policy was responsible for more mainland money being invested in the SAR.
'With the handover out of the way, more and more mainland companies will come to Hong Kong,' said Mr Chan.
'We will see a lot more companies from the central government, the provinces and even village enterprises.' Overseas investors accounted for about 10 to 15 per cent of buyers, with Singaporeans and Indonesians showing keen interest.
About 20 per cent of buyers were classified as unknown.
Mr Chan said another reason for the surge in buying activity during the first six months was pent-up demand.
'Transaction figures in 1995 and 1996 were very low,' he said. 'Over the last couple of years buyers accumulated purchasing power and now have boosted prices.' More buyers had come into the market in the past six months or so because property was still seen as a good buy.
According to JLW's figures, grade A office space is still 20 per cent cheaper than at the height of the market in 1994.
'1995 was seen as the bottom of the market and we have seen a lot of overseas investors [Singaporeans and Indonesians] who are very interested in our market,' Mr Chan said.
'Fundamentally, investors believe that the Hong Kong property market is in good shape.' However, this surge in buying was expected to slacken during the final quarter of the year.
'The market has grown quiet because people are expecting more buildings to come on to the market in the next few years.' JLW said five million square feet of grade A office space would be released on to the market, starting with Cosco Tower in about two months.
Mr Chan said he expected prices for grade A office space in the core business district to remain stable, perhaps drifting up or down 3 per cent during the next three months.
Any price movement would depend partly upon the success of the sale of the remaining floors of Cosco Tower.
It also would depend on how quickly the new office space coming on stream in Central was leased out, he said.
'There is a lot of stock coming on to the market. It is all happening in Central.' Rents were expected to increase by about 7 per cent over the next two quarters, he said.
Mr Chan said landlords could expect yields to increase to about 4.5 to 5 per cent from the current 3 to 4 per cent.