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HONG KONG, Feb. 23 -- The home prices of Hong Kong is expected to rise by 45 percent in 2005 and 2006, said Franklin LAM, Head of Hong Kong Equities at UBS, here Wednesday.

Speaking in a press conference, Lam said, "With home prices up by 34 percent in 2004, consistent with our call that prices would rise by more than 60 percent in 2004 and 2005, we maintain our forecast of a five-year housing up-cycle."

"The new cycle is based on a resurgence in demand as opinion in Hong Kong now appears to accept that the city would be a net gainer in terms of business and people flows as administrative barriers with mainland are lowered, a reverse from the previous bearish stance that Hong Kong would be 'hollowed out' by a low-cost mainland, which would lead to large-scale job losses, a potential devaluation of the Hong Kong dollar and deflation," he added.

"We have extended our forecast further into the five-year cycle. We expect home prices to rise by 45 percent in 2005 and 2006, equivalent to a 90 percent rise between 2004 and 2006," said Lam.

He expected that prices would rise by around 10 percent in the first quarter of this year, as pent-up demand is released after Chinese New Year and as sentiment improves on the back of some of the easiest mortgage terms on offer ever in Hong Kong.