The government would also continue to release land for office development at a steady rate, even as prices come under pressure, to better meet demand.

“The drop in the market has been in order, and we are not under a big economic bubble,” Chan said.

But Chan said the coming market adjustment would be far smaller than what the city went through between the Asian financial crisis in 1997 and the outbreak of severe acute respiratory syndrome (Sars) in 2003, when owners struggled to pay outstanding mortgages that were suddenly bigger than the value of their homes.

“Back then, more than 100,000 households found themselves in negative equity territory, but the situation now is very different from the period in 1997 to 2003,” he said.

Chan pointed to the tight supply of private homes over the past decade, with about 12,000 to 18,000 new flats coming onto the market each year, compared to the excess throughout much of the 2000s. Speculation had come under better control after the government introduced a host of cooling measures.

“The atmosphere in the market is different,” he said. “We do not see lots of buyers rushing into the market at a high price at the same time as in recent years.”

Hong Kong recorded 170,000 transactions in 1997, but volume fell to about 50,000 to 60,000 annually between 2013 and last year, he noted. That easing came on the back of four fresh stamp duties, including one to deter short-term ownership and a surcharge on non-permanent residents and corporate purchasers.

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Chan said the “staying power” of buyers, banks and developers had significantly improved.

“Buyers’ mortgage ratio remains low in general and developers’ level of leverage is much lower, in which they would not flood the market with supplies when the economy fluctuates,” he said. “Considering all risk factors, I believe when the market adjusts, there would be some negative equity cases, but the scale would be unlike the situation in 2003.”

Industry insiders, however, suggest more than 1,000 homeowners are on the verge of falling into negative equity, after prices at some housing estates fell by more than 10 per cent from October last year.

According to the Hong Kong Monetary Authority, there were 128 negative equity cases in the final quarter of last year, the latest period for which figures are available. There were none in 2017, and the previous time the number crossed into four digits was in the second quarter of 2016, with 1,307 cases recorded.

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The government relaxed mortgage-lending rules in October last year, allowing first-time buyers to take out loans equal to 90 per cent of the flat’s value, capped at HK$8 million (US$1.03 million) and double the previous limit. Sales on the secondary market jumped 34 per cent the following month, to 3,804 homes, according to Midland Realty.

Chan said banks had been allowing a “principal repayment holiday period” for new buyers following the government’s call. If the situation worsened, authorities might further ask lenders to be “more accommodative”.

An increase in joblessness was another risk, which was why the government was “paying all efforts to safeguard employment”.

In Hong Kong’s commercial property sector, transaction volume for office, retail and industrial properties hit a historical low in February, while rent for grade A office space has dived.

But Chan said he preferred to let the market adjust itself as commercial office rents had risen “massively in recent years”.

The government would continue to release new plots for commercial use, given the lead time involved.

“The land cycle is really long,” he said. “After we sell the land, it will take at least five years before the building is mature for rent or sale. We hope to continue our efforts amid economic downturns, so that we can recover earlier once the pandemic is gone.”