PENT-UP mainland demand is expected to stimulate a flurry of property investment in Hongkong once the present political uncertainty blows over. Mainland firms are thought to be stock-piling cash, waiting for Sino-British relations to improve before launching a new flurry of property investment in the territory. It is widely believed Beijing has been pressuring larger mainland companies not to invest in Hongkong property since the outbreak of political discord and this has resulted in pent-up demand. First Pacific Davies executive director Koh Keng-shing said mainland contacts had indicated they were encouraged by the Beijing hierarchy not to buy Hongkong real estate. ''I have not been told categorically that they have had direction from above, but some said the north [Beijing] was now more sceptical about investment here,'' he said. It is not clear whether the freeze was intended to accentuate the territory's political strife or was a result of it. China stole Japan's crown as the largest overseas investor in Hongkong property last year. China companies were investing vast chunks of their foreign earnings in Hongkong, clinching a string of high-profile deals, including the purchase of Nine Queen's Road, Central in May. While many of the deals struck were for business reasons, many were thought to be motivated to illustrate Beijing's long-term confidence in the future of Hongkong. But since the outbreak of political cross-border fighting after Governor Chris Patten's highly controversial inaugural address last October, buying has dried up. It is usual for companies to seek the nod from Beijing before undertaking major investments abroad. The apparent freeze has meant mainland companies have been sitting on large piles of cash which they would have otherwise invested in Hongkong property, reluctant to take it back to China and turn it into renminbi. Such companies were said to be reluctant to get in to the stock or forex markets because of the lack of security and were becoming increasingly anxious to see a healthy return on their money. Mr Koh thought the mounting pressure could soon force some companies to rebel. The central government appears to have less control over smaller mainland companies and it is thought that is why smaller property deals are still taking place. Some larger companies are said to have set up smaller companies with joint-venture partners to allow them to get back into the market. ''We hope they are coming back,'' said Mr Koh. Investment from all quarters has been exceptionally scarce since the breakdown of Sino-British relations, even when taking Christmas and Lunar New Year in to account. The loss of revenue has caused local estate agents serious concern. Mr Nicholas St Johnston, Brooke Hillier Parker investment director, said: ''We think some of the major companies have been advised by their chiefs to take a cautious view on Hongkong.'' He said while there were still plenty of mainland companies inquiring about Hongkong property, they were not pushing the deals like they were six months ago. Much of the mainland interest last year was in commercial buildings, but values now seem to be peaking. While some demand for office space is likely to continue for end-user requirements, interest is now said to be switching to residential blocks. Investors seem aware that the Hongkong Government will relax its 70 per cent maximum mortgage lending ratio guideline to banks sooner or later, and believe this will cause values to rise. Smaller mainland buyers from Guangdong have been trying to get a stake in Hongkong's residential property sector ahead of the predicted upsurge while the market is still depressed.