The International Monetary Fund on Wednesday warned that Hong Kong could see an abrupt fall in property prices after years of dramatic increases in one of the world's most expensive housing markets.

Home prices in the Asian financial hub have skyrocketed 90 per cent since 2009 due to an influx of wealthy mainland Chinese buyers, pushing home- ownership beyond the reach of many of its seven million people.

"The sharp run-up in house prices raises the risk of an abrupt correction," the IMF said in its annual review of Hong Kong's economy.

"A sharp price correction would lead to falling collateral values and negative wealth effects, which could trigger an adverse feedback loop between economy activity, bank lending, and the property market.

"The property sector is the main source of domestic economic risk," the Washington-based organisation said.

It however said the chances of a price correction that is large enough to generate a major macroeconomic and financial consequences is "fairly low in the near term".

It also said the city's government recent bid to slap new taxes on residential properties "should help dampen housing demand" but urged Hong Kong to ensure sufficient supply in order to boost home affordability.

News: The Daily Sun/Bangladesh/13th-Dec-12