Morgan Stanley is saying Hong Kong's strong property market will not last due to pressue on the region's wages and population growth, especially from Guandong. Which might be true in the long run, but as the saying goes, in the long run we're all dead. The economist has overlooked just a couple of important factors, namely supply and demand. Supply is tight at the moment because the Government restricted sales in the post-1997 property crash. Property supply takes time to come online, because building blocks takes years. Only now is the Government starting to release land parcels for redevelopment again. Against that Hong Kong's economy is recovering strongly from the slump due to SARS. Hong Kong property has large amounts of untapped demand thanks to ample liquidity courtesy of the US's easy monetary conditions.

Guandong will exert only limited pressure on Hong Kong in the years ahead. Even as China's richest mainland city, Guandong has only a fraction of Hong Kong's wealth, productivity, capital and resources. If Hong Kong was still an economy reliant on cheap labour, I'd be worried about Guandong and China. However Hong Kong isn't. It is a port, a logistics centre, a legal and financial centre, a first world city with a first world legal system. There is no city in China, not even Shanghai, that is close to challenging Hong Kong's status or economy at this stage. Like all markets, Hong Kong's property market will continue to move according to the only forces that really matter: supply and demand. Everything else is irrelevant.

At the same time I'm going to make a bold prediction. With the SCMP running an oil price scare headline on the weekend trumpetting the potential for US$60/barrel oil, I am pleased to say I have seen no better sign that the bull run in oil is almost over.