The 12 months since the handover have been a worrying time for property owners and developers with the huge asset appreciation that had dominated Hong Kong for the past two years being reversed.
Prices dived 40 to 50 per cent during the year, causing confidence to wane to an alarming level and last month forcing the Government to try to remedy the situation by freezing land sales until March 31 next year.
The crisis is the most severesince the property crash in the early 1980s. Relatively, the market correction in 1994, triggered by the Government's intervention and rising interest rates, was insignificant by comparison.
The Government's new housing policy, adopted last July with its emphasis on the provision of 85,000 flats a year, has been partly blamed for the current slump.
However, more important factors have been tight liquidity and high interest rates which have restrained bank lending and dampened buying.
The regional financial turmoil in October acted as a trigger, aggravating the problem.