FOREIGN investors have always found it difficult to understand the high prices paid for property in Hong Kong. When the Government announced a review of residential prices, skittish overseas investors panicked and sold out of the market. Their fear was that Hong Kong would suffer the same fate as Tokyo, with a bursting property bubble deflating the stock market as well. There is no dispute that the Hong Kong market is heavily exposed to property, but with hindsight it looks like those original fears have been well overdone. Property stock earnings for the major developers have all come in ahead of expectations in spite of the slowdown in transactions over the first part of the year. If the market was in trouble one would expect earnings would be the first casualty. And now there are signs the market is in fact much stronger than most people seem to think. It may be premature to say the property market has recovered, but certainly it can be safely said the worst is over. It will probably take another good set of earnings results from the developers to convince overseas investors the market really is healthy.