POLL-HK property to outshine Asian peers; bubble risk recede

* Asia property price appreciation to ease in next two yrs

* HK property set for low double-digit growth by end 2011

* Sydney house prices seen up 10.3 pct by end 2011

* Tokyo property seen flat, S'pore mkt to peak in H2 2010

HONG KONG, Nov 6 - Hong Kong housing offers the most upside to investors among the four main Asian markets over the next two years and with prices in the city set to grow little more than 10 percent, the risk of a bubble is fading, a Reuters poll shows.

Across Asia, price appreciation will ease as interest rates rise, analysts say. Sydney house prices are set to rise 4.5 percent between now and the end of next year and 5.8 percent in 2011, moderating from expected 10 percent appreciation this year as monetary tightening curbs demand.

The poll -- which covered Hong Kong, Sydney, Singapore and Tokyo -- sees Hong Kong prices increasing by 8.8 percent by the end of 2010. In 2011 house values will gain a slim 2.5 percent as the euphoria subsides. Hong prices are up 28 percent this year, and luxury apartment prices by more than 40 percent.

Hong Kong interest rates, which track U.S. rates because the currency is pegged to the dollar, should be rising by late next year. The government has warned of a possible bubble -- or excessive price rises that could trigger a sharp correction -- and has threatened to intervene if necessary.

For now, the market is not too worried about a bubble after the city just recently emerged from recession,

"The cold, hard fact is that it's better to worry about a potential asset price bubble than be despairing about negative equity," said Simon Smith of property consultants FPD Savills.

Analysts said 2011 projections were tentative as uncertainty about policy and an increase in land supply made the outlook for Hong Kong far more unpredictable than other cities.

Tokyo is the least attractive investment over a two-year span as home prices are set to be around today's levels by the end of 2011. The outlook has improved since a Reuters poll in June, which forecast a 6.3 percent drop in prices next year.

Singapore prices will gain 7.5 percent next year but peak in the second half and will be flat in 2011. Prices picked up this year and surged 16 percent in the third quarter from the second.

"Over the next four years, developers will build and launch nearly 65,000 private residential housing units -- equal to more than six years of above average demand," said Leong Wai Ho, an economist at Barclays Capital. "And over the next four years, interest rates will rise gradually ... I just don't understand where the optimism is coming from."

TIGHT CREDIT

The outlook for Singapore property has also improved from the June poll, which forecast only a 4 percent gain next year.

Hong Kong's outlook has dimmed slightly from June, when prices were forecast to increase 10-15 percent in 2010.

Asset price appreciation in Asia contrasts with Dubai where prices are set to keep falling next year, and a minor rebound in U.S. and UK house prices.

Hong Kong gross domestic product will rebound 3.4 percent next year, while Singapore GDP will surge 5.7 percent and Australia's economy will grow 2.7 percent, Reuters polls show.

Japan's economic growth of only 1.3 percent and low consumer confidence will weigh on property in Tokyo. House prices have dropped 3.3 percent in the past 12 months, according to research firm Tokyo Kantei. New developments have suffered more as market weakness and tighter credit forced developers to slash prices.

In Hong Kong and Sydney a shortage of new housing will boost values. Hong Kong property is in demand among rich Chinese, who set a world record $9,200 per square foot for one apartment.

Singapore is also drawing foreign buyers since the market has picked up this year but the government has pledged to resume regular land sales next year.

Concern about an inflating housing market prompted Australia last month to become the first G20 nation to raise rates since Lehman Brothers collapsed a year ago. It followed up with another quarter point increase this week as house prices jumped 4.2 percent in the third quarter to a record high.

"Prices are extremely high, arguably among the highest in the world in terms of income levels," said Alan Moran, a director at the Institute of Public Affairs in Australia.

Policymakers across Asia face a dilemma though, fearing too much monetary tightening could choke a nascent economic recovery.

South Korea has threatened to raise interest rates to cool a property boom and avoid a bubble but the central bank and government appear at odds over how quickly they should move.

A Reuters poll last month forecast rate rises will dampen sentiment: house prices in Korea will rise by 6.5 percent before they peak, sometime in the next six to 12 months. (Additional reporting by Eriko Amaha in SYDNEY; Mariko Katsumura in TOKYO; Nopporn Wong-Anan in SINGPORE; and Farah Master in HONG KONG; Editing by Jan Dahinten)