Hong Kong investor interest in the mainland property market may recover this year after a string of government regulations worked to curb ballooning housing prices, an industry report said.

The number of deals signed by Hong Kong buyers for new homes on the mainland is expected to rise 11 percent from a year earlier to 19,230, after falling two percent in 2006, according a report released on Wednesday by Centaline China, a Hong Kong-based real estate firm.

Transaction volume may climb 12.5 percent year on year to 13.5 billion yuan (US$1.73 billion), after jumping 14 percent a year earlier.

"Hong Kong buyers are optimistic about the mainland property market in the long run," the report said, implying that future increases could be even higher.

"But many are cautious about buying houses here this year, betting prices may cool off in the short term led by new rules to rein in the red-hot sector."

A total 17,400 mainland deals were concluded by Hong Kong buyers in 2006. More than 310 mainland projects were marketed in Hong Kong last year, posting 12 percent growth compared with 22 percent for 2005.

Since May, the central government has introduced a series of policies, including new taxes and tighter loan rules, to restrict overseas real estate investment and ease the pressure on surging property prices. But strong economic growth, rapid urbanization and rising personal incomes have continued to buoy the market.

The anticipation of a stronger yuan also attracted a greater influx of overseas capital to the mainland.

Growth in housing prices in the 70 cities on the mainland moderated to 5.2 percent in November, after a 5.4 percent rise a month earlier, the National Development and Reform Commission said in December.

Meanwhile, the Hong Kong real estate firm predicted that Hong Kong investors may buy 3,950 second-hand units in 2007, up 15 percent year on year. Transactions are likely to reach two billion yuan and rise 19 percent from a year earlier. -China Daily