Residential property prices may not rise for another 12 months despite recent reports the market has bottomed and expectation the economic recovery would soon drive it into positive territory, according to JP Morgan. Emerging Asia economic research vice-president David Fernandez said that while some market watchers were aiming for stronger prices in the near future, supply problems and interest rates could weigh on the residential property market for another year. 'Demand-side fundamentals continue to improve and I think that is what some people have been led to believe - that you are at the bottom of the cycle,' Mr Fernandez said. 'Some people are getting excited about the upside [but] we say that for the next 12 months, we may not see any upside.' JP Morgan economic research analyst Grace Ng said that since Chief Executive Tung Chee-hwa's recent decision to abandon a plan to provide 85,000 new units every year, there had been hopes for a return to a pre-crisis norm and a property rally. 'At present, though, such a comeback seems highly unlikely to occur soon,' she said. Although employment data has improved demand, the residential property picture continues to be one of excess supply. Official forecasts are that new housing supply will rise to 113,000 units this year and 93,000 units next year, well above the average of 64,400 from 1990 to 1997, she said. 'Allowing for a 3 per cent per annum population growth rate, there will still be a significant over-supply of property units going forward,' Ms Ng said. According to Mr Fernandez, the United States Federal Reserve may not raise interest rates this month, but there is no reason it may not raise them again in six months. 'I think it is far too early to say that next year, you may not get [a US rate rise],' Mr Fernandez said. 'That is another reason we have to stay cautious.' Lehman Brothers property analyst Anthony Wu differs in his outlook, saying that by the second quarter of next year, wages could rise and spending power would increase. Mr Wu said he expected a 10 per cent band in which the market could swing up or down in the next 12 months. Still, he said Lehman was increasingly positive on the sector in the equity market, and while he did not predict a fast improvement, he believed property prices would stay at much the same level for the rest of the year. 'I do not think the government's policy will boost prices but I think they are building a floor now and this is becoming more solid,' Mr Wu said. 'I do expect some salary rises and once people feel comfortable with their jobs and salary, then they will start spending.' Property prices fell as much as 50 per cent during the Asian crisis. Prices had gained as much just before the crash from the 1997 peak. According to a weekly price index conducted by Centaline Property Agency and City University, on August 6, the index was at 48.44 compared with a low for this year of 46.72 on June 11, and a year high of 55.32 on February 27.