HONG KONG - The International Monetary Fund (IMF) said in a report published Friday that Hong Kong's property prices are likely to be pushed even higher given HK's buoyant economic outlook and its position as a leading recipient of global capital inflows.

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The working paper, authored by Ashvin Ahuja and Nathan Porter, holds that despite sharp increases in HK's housing prices in the past months, the current price level does not appear to be significantly out of line with the fundamentals.

The report reviewed the rebound of Hong Kong's property prices in both luxury residential unit and mass market segment.

"Price-to-rent ratios rose to new highs around the second half of 2009 while price-to-income ratios also resumed their surge. Mass market price-to-income is now about 2.5 times it was at the bottom in 2003, making houses in Hong Kong expensive relative to household income when compared to other cities in the region," the report said.

Like many analysts have done, the IMF economists attributed the surge in Hong Kong's housing prices in recent months to the " turnaround in economic growth and competitive mortgage programs offered by banks at extraordinarily low interest rates."

The IMF recently upgraded Hong Kong's GDP growth projection to 6.75 percent for 2010.

The HKSAR government has taken various measures to cool down the property market. However, the IMF report said "in spite of the measures taken, the risk is that house prices will continue to rise rapidly on the back of high liquidity in the banking system, low interest rates, improving demand for credit and continued robust growth in the Chinese mainland."

The factors combined, might "make price misalignment from fundamentals a financial stability concern," the document warned.

The IMF economists also wrote in the report that over the past decade, misalignments in house prices have corrected frequently in Hong Kong.

"Given the Hong Kong authorities' awareness of the risks excessive property price growth poses and their experience in containing the impact on household and financial institution balance sheets, the likelihood of financial stability precipitated by a housing price bust is small."  

In case high levels of property price inflation continues, the IMF advised in a staff report also published Friday that the HK government could consider further raising the stamp duties on housing and increasing the level of the rates for higher-end properties.