The boys seem to think this market has bottomed. Not grand statements, but signs the developer kings believe the worst of the property bust is over. Sales activity, firmer prices and talk of conversion premiums being settled are perking up estate agents. After four months of high interest rates and all-pervading economic gloom, signs of recovery are emerging. Henderson Land and Sino Land are shifting pre-sale units, and talk is of strong interest in a Causeway Bay land sale. Calmer currency markets and lower interest rates seem to have convinced developers that land is a buy at these levels. A number of absentees from recent years' auctions can be heard declaring an interest. Last week's clearly defined land disposal programme has reinforced the sense of orderly recovery. Not a return to tearaway prices, for sure, but an end to spiralling declines and total paralysis. Hong Kong's asset markets have been in a state of suspended animation these past few months. Once leveraged speculators were washed from the system, everyone else just seemed to sit tight and wonder what next? This proved deeply testing for developers who depend on constant cash flow to keep their land acquisitions and flat-manufacturing operations going. By its nature, Hong Kong is not a market that can stand still. The Government must sell land to fund itself; developers must shift flats to buy the land. If they don't, the system fails, stock prices fall and, if the downturn is severe enough, the public stops buying. Fortunately for all concerned, enough Hong Kong people have an insatiable desire to catch the upturn of each cycle and keep trading. Home-owners see their interests aligned with developers and treat raised hands at auction as a vote of confidence. In January and February, the spectre was raised of that normally well-oiled machine grinding to a complete halt. This was worsened by complete confusion in the Government's public housing policy. The virtual give-away of public-rental flats meant buyers of flats in home-ownership schemes sought a get-out from sales contracts. This in turn dissuaded potential buyers of cheap private-sector housing. Now, at least, developers are shifting units, generating cash flow to service their debt and to buy new land. Cheung Kong has shown its desire to chase bargains, Henderson Land looks well positioned, while Sun Hung Kai Properties may have over-stretched itself last year paying land-conversion premiums. With 59 sites on offer, there is plenty to go around, and, even in these capital-scare times, there are enough cashed-up manufacturers and ambitious red chips that want a crack at fast-buck development returns. Developers realise that even down-graded Government forecasts of flat supply are likely to undershoot. Private-sector building might drop to 15,000 units next year, with little improvement in 2000. Land to be made available to the Housing Authority suggests an average of 40,000 rather than the planned 50,000 public units being built. All this means any notion of a constant stream of 85,000 new flats hitting the market is hopelessly optimistic. Should monetary conditions stay favourable and world markets hold together, developers will be hoping for another speculative price spiral some years hence. That, at least, is the scenario that past history and boundless hope in Hong Kong reinforced concrete suggests. It is born of a belief that Li Ka-shing and friends have this market worked out. The spoiler to this happy tale remains Hong Kong's great un-washed. Unemployment will undoubtedly rise over the next year, but the degree of white-collar job destruction is unclear. Not since the grim days of 1983-84 have middle managers lost their jobs in great number. More than that, the fear of job losses means a quick rebound in prices is highly unlikely. By any normal measure, Hong Kong property remains way over-priced. The question is whether any recovery will be strong enough to keep the spirit burning in a population facing a hard few years.