Nevertheless, Shih Wing-ching, founder and director of Centaline, insists the property market remains a good investment.

"To protect your money from inflation, you need to include property in your asset portfolio. It makes sense to hold on to property rather than cash. Now is not the time to sell," Shih advises. "If property amounts to less than 30 per cent of your portfolio, you should make it up to 30 per cent. If it is more than 50 per cent, you should sell some of it. [Ideally], property should make up 50 per cent of your assets. But this is not a good time to get too aggressive in buying. So keep it at a minimum of 30 per cent."

However, a developer advises that now is a good time buy property "if you have extra cash in hand".

"Although property prices are high, if you have extra cash in hand, property is still your best bet," says Donald Choi Wun-hing, managing director of Nan Fung Development.

"Property investment beats inflation. Investors should stick to areas with matching infrastructure and facilities, which have a higher investment value."

Nonetheless, Choi also warns against throwing caution to the wind because "the rally will not last forever and the 20 per cent increase [in home values] this year is not going to repeat itself next year. We expect the rise next year to be under 20 per cent". He adds: "The property market depends largely on the local economy and external factors. But right now there is no sign of Hong Kong's unemployment worsening or its economy slumping. Hongkongers are confident and optimistic. They still want to buy property to improve their living environment. There is also the idea of accumulating wealth because the economic environment is holding steady and the interest rate is low."

Hongkong Land's head of residential property, Cherrie Lai, urges buyers not to "pick areas with an excessive supply".

"Pick areas with limited supply and, if the price is right, it does not matter how old the building is. With low interest rates, one should keep an eye on the market in the next 12 months. The market is cyclical. There is a major adjustment every three-and-a-half years, and a minor adjustment every 18 months," she says.

"End-users may consider projects along the MTR lines, with prices ranging from HK$4 million to HK$5 million. There are plenty of options out there. For example, in Tseung Kwan O and Tai Wai. Once the Sha Tin to Central Link is built, it will only take 45 minutes to reach Central.

"But if your goal is to turn a profit, then the holding period is key. Investors should look for units with high rental return in the downtown area, regardless of the age of the building. The lack of new supply in the downtown area will prop up the prices. And inflation also drives up property prices," Lai adds.

Anita Chan, director of sales and marketing at Wing Tai Properties, says that for end-users, the impact of the government's latest intervention will be small.

"We expect transaction volumes to drop in the next few months. But the price levels and [market] prospects will become healthier, while supply and demand will strike a better balance, and demand will continue to be strong."

Bank of America Merrill Lynch is maintaining its property price forecast of up 20 per cent this year, and up 5 to 10 per cent for 2013.

Nevertheless, the United States investment bank says volumes are likely to decline as demand and supply are expected to shrink. Non-locals and speculators will be affected by the new cooling measures, while end-users and investors may take a wait-and-see attitude in the near term.

It adds prices may correct modestly in the near-term, as weaker sentiment may prompt some sellers to cut prices, but low interest rates are likely to provide support in the mid- to long-term.

A Goldman Sachs report says the retreat of non-locals may temporarily halt the price rally and developers' sales momentum, but permanent residents are expected to fill in any gaps. It says as long as the underlying drivers of the property market - tight supply and low interest rates - persist, selling pressure will be limited.

Goldman Sachs adds that the experience of Singapore's housing market suggests the special stamp duty and the Buyer's Stamp Duty may not derail the price cycle.

The US investment bank believes the new policy could affect the primary market more than the secondary. In particular, luxury properties will be affected more than the mass market, as non-local buyers and company buyers tend to concentrate on the higher-end. It notes that none of the new policies are directly addressing the main causes of a strong property market - demand, tight supply and low interest rates.

J.P. Morgan expects local end-users, who can afford to buy, will go to the primary market, as the available sale units in the secondary market will be fewer.

It also points out that the cost of redevelopment of old buildings is now higher, as the Buyer's Stamp Duty is applicable to developers that acquire them.

UBS takes a bullish view of the market, saying property prices are unlikely to have any significant correction. It says its 2012 full-year price increase is still maintained at 10 to 15 per cent year-on-year, while next year's price increases are forecast at 5 to 10 per cent year-on-year.

Credit Suisse does not believe the government measures will have any real impact on prices. The bank believes a further reduction in supply in the secondary market is likely, and prices are likely to be pushed up further. It argues that supply in the secondary market is likely to narrow further, which should indirectly benefit developers selling primary units.

However, Deutsche Bank is bearish, saying: "We no longer expect any upward momentum in residential prices, and believe residential prices will reflect weakening fundamentals in the absence of foreign buyers."

It expects a 15 to 20 per cent price decline within the next 24 months and a near-term shock on both prices and transaction volumes.

It says the new measures have dampened market sentiment, and there could be a near-term price shock of up to 10 per cent in the secondary market. It says pricing on upcoming primary launches could be real triggers for further price corrections in the overall market. Citic Securities International's executive director Adrian Ngan thinks prices may rebound after dropping 2 to 3 per cent in the next three to six months.

"After that, we will see the beginning of consolidation. Luxury homes are in a better position to regain the momentum," he says.

"The market has evidently changed, with local buyers as the major players and small- to medium-sized apartments in the spotlight. But as supply increases in the next two to three years, prices are less likely to rise sharply.

"That will not translate into a slump though. Developers will carefully plan their marketing strategy based on market sentiment and government policy. Developers are bound to come up with new ways to lower prices and appeal to buyers."

SINGAPORE A MODEL EXAMPLE

Some investment banks cite Singapore as an example of how a stamp duty on foreign buyers could affect the property market.

In 2011, the city state launched additional buyer stamp duty (13 per cent for non-locals and 3 per cent for locals).

Residential property prices weakened slightly and volumes fell. But primary sales volumes gradually returned as developers shifted their launches to smaller apartments.

While foreigners held back, local buyers picked up the pace. Goldman Sachs says the proportion of foreign buyers fell from 19 per cent to 7 per cent after Singapore's additional stamp duty, while more locals entered the market.

J.P. Morgan points out that some developers in Singapore will subsidise the buyer's stamp duty as an incentive for foreigners to buy, a strategy that some projects in Hong Kong are reportedly beginning to use.