Morgan Stanley's historical trends analysis shows that the performance of property development and developer stocks relative to the Hang Seng Index have closely tracked movements in office rents, prices and residential values.

Thus Mr Churchouse expects shares of property investment companies to continue to out-perform the market index only until the middle of next year.

Michael Green, his counterpart at SG Warburg Securities (Far East), is slightly more bullish, predicting another three years of progressive rental and capital value rises in the office sector before an over-supply situation once again sets in.

Last year's relentless rise in office rentals and capital values had been widely predicted, because of the slowdown in buildings coming on stream and continuing high demand for space. But its frightening pace took almost everyone by surprise.

However, a few years down the road the supply and demand equation will be changing.

A mass of new prime commercial development land will be coming on the market with the completion of the West Kowloon, Wan Chai and Central reclamations.

By that time, Morgan Stanley expects a degree of consumer resistance to high prices to have crept in, dampening the prospects for further value increases.

In addition, the Government's recent relaxation of regulations limiting composite industrial/office buildings is adding to supply.

The Hong Kong property market is so strong that it could no doubt cope with the supply and demand equation being tugged in one direction, but perhaps not both at the same time.

Should demand for space be hampered by any economic slowdown ahead of Hong Kong's transfer of sovereignty in 1997, the territory's office market could be in danger of a Tokyo-style collapse, as NRI predicts.

In normal market circumstance the old adage ''the higher you climb the further you have to fall'' would come in to play.

But the oligopolistic nature of the Hong Kong property development industry makes the likelihood of a major crash unlikely.

A hefty correction did take place in Hong Kong in the early 1980s when the supply-and-demand equation was tugged in both directions after Tiananmen Square. But Hong Kong's developers are now far too cash-rich and worldly wise to allow a repeat performance to occur.

On the upside of property cycles, property stocks often trade at premiums to their net asset values, but we have rarely seen so many stocks trading at such large premiums as we do today.

Morgan Stanley's view is that historical trends will prevail again during the current cycle.

Mr Churchouse says investment property stocks, for instance, will continue to out-perform, despite trading at a premium, until the market perceives that office values have peaked or are close to topping out.

Such stocks will immediately under-perform once that view becomes widespread even though property prices may not ease so quickly, he says.

Once land from the Central, Wan Chai and West Kowloon reclamations is unlocked, the performance of property developer stocks relative to the market is likely to prove more volatile.

As with investment property companies, share price movements can also be expected to trace investor expectations of trends in residential property prices, which in turn are currently being massaged by banks' lending policies.

Under a carefully stage-managed market, Morgan Stanley expects genuine end-user and leasing demand for residential property to remain fundamentally strong, driven by low interest rates, full employment, increasing household incomes, rising real wealth, and only modest new supply over the coming one to two years.