Hong Kong - Hong Kong's leader on Monday vowed to act to prevent a bubble in the city's property market.

Chief Executive Donald Tsang promised business leaders that he had "the tools in place to stabilise the market if necessary," and that action already taken had proved the government did not want a "huge property bubble developing."

"Although the dynamics of the situation are different to 1997 when there was much more speculation ... any bubble is not healthy for the long-term development of the property market or the economy as a whole," Tsang told a Hong Kong Business Community luncheon.

Hid pledge followed measures introduced last month by Hong Kong Mortgage Corporation aimed at curbing the growing property bubble.

Those included tightening restrictions on mortgages and stopping mortgage insurance to people who buy homes as investment properties with large loans.

The financial secretary also announced last month that more land would be opened up to auction for residential developments.

Concern over soaring house prices has grown in the city of 7 million after analysts warned Hong Kong is facing the same kind of property bubble that affected the territory in 1997.

The number of new flats on the market is the lowest for five years which had led speculators and property investors to push up prices.

Housing prices have soared by more than 20 per cent despite the economic downturn, while the luxury market has seen prices rise by as much as 40 per cent, with sales of some luxury properties over the last month fetching record prices.

Following the burst of the property bubble of 1997, prices fell by as much as 70 per cent. (dpa)