INVESTOR sentiment for property stocks appears to have improved since last week after Morgan Stanley painted a rather optimistic picture of prospects for the territory market. Buying interest, however, remains lacklustre as home-hunters still appear bewildered and hesitant about entering the market for fears of further slides in prices. The state of the commercial property sector also is depressed as investors worry about an oversupply of office premises. The latest Land Registry figures showed that property activity decreased further in September with a 3.8 per cent fall in transactions from August. This has reaffirmed that the market's doldrums are likely to prevail during the coming months in the absence of any positive news. An interest rate cut in the United States may be the positive news most likely to come before the end of this year, but it is likely to be a marginal adjustment of about 0.25 of a percentage point. Even if Hong Kong followed any cut in interest rates, it would not be sufficient to trigger a rally in the property sector. An early home market recovery is unlikely to come unless the Government loosens its grip on the 70 per cent mortgage lending limits and the pre-sale controls for unfinished residential properties. It was the Government which took the lead in suppressing property prices in Hong Kong through anti-speculation measures in June last year. With the dampening effect from interest rates rises, the property market has plunged into a dramatic correction in the past year which has hit the industry itself, and also indirectly accelerated an economic slowdown. The Government should be proud of successfully holding down property prices, but it is questionable as to whether or not further slides in prices will be in the best interest of Hong Kong's economy. The Government should now review its intervention and try to help revitalise the market, given that home prices have fallen back to the levels of early 1993, which are more affordable for homeseekers.