In October, the government slapped a 15 per cent Buyer's Stamp Duty (BSD) on non-permanent residents and companies wanting to acquire properties. It also raised by five percentage points a special stamp duty on sellers, introduced two years ago, to curb speculation, and extended its effect on resales to three years. The rates now range from 10 to 20 per cent.

"With these two measures, I think property prices will not rise in the coming few months, and prices may fall. However, the level of decline will not be big, because there is not enough supply. So the market will be more stable in the next few months," says Michael Choi Ngai-min, a member of the government's Long-Term Housing Strategy Steering Committee, and a member of the Housing Authority.

He notes that the annual supply of private sector homes was about 25,000 units from 1991 to 2006, but the figure fell to just 9,800 units from 2007 to 2011. "The shortage of supply is a key reason for the rising property prices and rents," Choi says.

"In the past, the government was more reactive, but it is now looking ahead, especially focusing on Hong Kong's housing needs for the next 10 years. The government is also considering the impact of population growth, as well as newcomers from the mainland, senior citizens and young people."

He also says that Hong Kong needs to address the needs of the low-income group, which faces a long wait for public housing, and others whose income levels cannot catch up with soaring property prices.

"For the low-income group, there should be public housing. For those who cannot afford to buy property in the private sector, there should be subsidised housing, such as HOS [Home Ownership Scheme] flats and loans. As for the private sector, we need to ensure adequate supply."

The HOS helps families with monthly household incomes below HK$30,000 to buy homes at an affordable price.

The spectre of a market collapse, similar to the one in 1997 - when the Asian financial crisis erupted and when former chief executive Tung Chee-hwa pledged to tackle soaring property prices by turning out 85, 000 flats a year for the next decade, which resulted in prices plummeting more than 40 per cent just months later - is unlikely, as Choi insists that "nobody is opposing public housing, because they do not overlap the needs of the private sector".

He adds that "the question now is about people who do not qualify for public housing, but cannot afford homes in the private sector - these are the marginal middle class and young families. These people cannot buy a home without subsidised housing, such as the HOS and 'My Home Purchase Scheme'. The solution is simple, I would suggest we could introduce low-interest or interest-free loans to help people buy property.

The My Home Purchase Scheme is a rent-to-buy programme, allowing families earning up to HK$40,000 to buy flats outright. Those who rent first will be able to buy their flats at a capped price to ensure affordability.

"These are extraordinary times. If property prices keep rising, the bubble will eventually burst," Choi says.

Victor Lui, deputy managing director of Sun Hung Kai Properties, says the government intervention will have a "bigger impact in the luxury sector, especially with the BSD affecting company buyers. It not only affects mainland buyers, but also overseas investors. Although volumes will drop, I believe prices will stay stable. Supply will remain limited, and property owners are not in a hurry to sell, so I think property prices will not change much".

As for the mass market, Lui says there may be slight price adjustments.

"Landlords are reluctant to sell. Prices may soften, but there will not be a major adjustment," he says. "Although the government factor is affecting the property market, Hong Kong's economy remains sound, and the interest rates will stay low."

While there has been a knee-jerk reaction to the cooling measures, Lui says there are two outside factors expected to keep the property sector resilient. Last month, there was a smooth transition of power in China, ensuring continued economic growth, which will have a spillover effect on Hong Kong.

Also in November, President Barack Obama's re-election could mean that Federal Reserve chairman Ben Bernanke stays in office, making it more likely that the low interest-rate environment and more hot money pouring into Hong Kong will continue.

Looking ahead to next year, Justin Chiu Kwok-hung, executive director of Cheung Kong Holdings, says he is confident about the market, as the economy and the business environment are expected to be strong.

Despite the intervention, Chiu says the objectives of his company and the government are similar. "I think [the] roles of the government and our company are complementary. We support an increase in land supply, and our objective is to provide housing for the people of Hong Kong."

He also reveals that Cheung Kong is to increase its sales on the mainland next year, from less than 10 per cent of the group's total sales to more than 20 per cent, with projects in Beijing, Guangzhou, and for the first time, in Shanghai.

Chiu says Cheung Kong expects to sell about 4,000 units in Hong Kong next year, mainly in LOHAS Park in Tseung Kwan O, Tsuen Wan and a project near Tai Po. "We will not slow the launch of projects, and will start selling once we get consent. But in terms of pricing, we will make it acceptable to the market conditions at the time."'

Professor Eddie Hui Chi-man, of the Polytechnic University's department of building and real estate, and a member of government's Long Term Housing Strategy Steering Committee, acknowledges that the local real estate sector is complex.

With a mandate to plan Hong Kong's future housing requirements, Hui says the most important task of the government committee is to set out the priorities in dealing with a number of key issues. "There is a power struggle among various interest groups as to which direction the property market [should be] going. Everybody wants property prices to stabilise; property owners do not want prices to fall. In a free society, people do not want the government to interfere," he says."We first have to identify the problems, and then we need to understand the real housing needs of the people. Based on the various needs, we look at the [number of homes available or coming on to the market], and make suggestions to the government as to how to match the needs with supply."

Thomas Lam Tat-man, general manager of the sales department at Henderson Land, expects a stable market next year, with prices going up by 5 to 10 per cent.

"Small- to medium-sized units in urban locations will outperform the market," Lam predicts.

"At the moment, property supply is still short. Even though there was an increase in new units under construction to 17,338 units in the first nine months of this year, and a rise in completed units to 6,20 units, this is still way behind the market demand. Many first-time homebuyers are still waiting for the chance to buy property," Lam says. He adds the cost of construction has been increasing as a result of rising raw material and labour costs. The cost per square foot is now at least HK$4,000.

"Many people have a lot of cash and urgent demand, and most of this will go into the property market," he says.

Chu Ip-pui, executive director of Kerry Properties, believes that "after three years or so, there will be more supply. Between 2012 to 2014, the annual supply will be about 14,000 units.

"But by 2015, there may be 20,000 units. If the government keeps on selling more land, there may be more than 20,000 units."

Hong Kong's economic and social factors have not changed, Chu says. "There is a low interest rate, low unemployment, and undersupply of property, so I believe the future of the property market will be stable and healthy," he says.

STORM BEFORE THE CALM

Shih Wing-ching, founder and director of Centaline Properties, believes prices and volumes will gradually recover after a difficult start to next year. "I think prices will weaken at first, but go up later, though not sharply, just 5 to 8 per cent for 2013," he says.

"The primary market will be relatively difficult. Investors will not enter a falling market. They will only buy when the decline has stopped. So buyers now are mainly end-users. From December to February, transaction volumes could fall by 40 per cent. In the secondhand market, prices will not fall too easily as sellers are reluctant to lower prices. But the property market will begin to stabilise after the Lunar New Year. By the middle of 2013, prices could gradually recover. Shih says government intervention was inevitable. "The community has changed. {People] and even the media want the government to do something concrete," he says. "People are blaming the government and are pushing it to take action, and that means intervention."