" The risks associated with credit and property market conditions have not abated," it said.

Property boom

The territory' s property boom is officially out of control. Carrie Lam, the chief executive, said eight rounds of mortgage controls have failed to stop the speculation, and may even have been counter-productive.

" The government really has no way to curb property prices," she said.

Consultants Demographia estimate that prices are 19.4 times median incomes, up from 18.1 last year, making it the " least affordable" city in the world. (Sydney is 12.9, and London 8.5). Prices have jumped fourfold since 2003 in real terms.

In December, a mystery buyer paid $US200 million for two flats at The Peak on Mount Nicholson, designed by Alexandra Champalimaud. The development is a favourite among Shanghai' s super-rich. Chinese investors now account for 40 per cent of all land purchases in the enclave, despite a 15 per cent stamp duty for outsiders.{C}

{C}Chang Liu from Capital Economics said 90 per cent of all mortgages were priced off floating interbank rates, leaving the market highly vulnerable once interest rates rise in earnest.{C}

{C}" We expect residential property prices to fall by more than a third in the next few years," he said.{C}

{C}Peter Churchouse, from Stansberry Churchouse, said leverage levels are manageable, with zero likelihood of repeating the 60 per cent price crash seen in the late Nineties. Average loan-to-value ratios for new mortgages are just 51 per cent (though 76 per cent on the existing stock).{C}

{C}Commercial developers have a low gearing, with a net debt to equity ratio of 15 per cent to 20 per cent. " I don' t see any systemic risk to the banking system or any signs of a residential real estate bubble in Hong Kong," he wrote.{C} {C}