Hong Kong is ranked as one of the most expensive real-estate sectors in the world. But after years of steady increase, the high-flying residential property market is showing signs of weakness, with HK's new-home sales cooled. Our correspondent Joel Flynn has the story.

This is what $4.3 million gets you in Hong Kong. Located in Pok Fu Lam, it comes with 1,650 square feet, three bedrooms and a sea view - not to mention the comfort of a sure footing on the city's slippery property ladder. Dorothy Betty bought this place with her husband Tom in March last year. It's only the second house they've ever bought in Hong Kong - the result of what they call a crazy market.

DOROTHY BETTY HONG KONG HOME-OWNER "Absolutely crazy. It's an enormous price hike, certainly compared with what we paid in 2004 for our first property, compared with the purchase price for this place. In 1981 when I arrived there was no way I could have afforded to buy a property. Even then prices were very very high. It's a small place and there's never enough accommodation here."

Dorothy is worried about what this means for her children's future in Hong Kong. This is a city internationally renowned for the cost of housing - the least affordable in the world.

JOEL FLYNN "But the bull run that's driven prices here to all time highs is looking fragile. Statistics show that housing demand has cooled amid rising pessimism about the outlook for the market."

Developers are cutting prices and offering extras to lure buyers - including things like cars, and even discounts on school fees. The worry is that rising interest rates and government cooling measures could cause heavy falls. Some estimate prices could drop as much as 15 percent before the end of the year.

HONG HAO, HEAD OF RESEARCH AND STRATEGY BOCOM "What we're seeing is there's a divergence in sell-through rates between different developments. Vanke has one residential development that's about 300 units, and that seems to be selling very well, 100% sell-through. But then Henderson Land and Sung Hung Kai, they have two other residential developments that're only half sold right now."

While primary market listings are showing signs of slowing though, those involved in the secondary market are less concerned. This flat in Happy Valley is currently on the market for $1.1 million. It's being sold by DSP Homes - a small business that handles only a handful of sales a year and primarily deals in rentals. The company's boss says he's not worried.

DANIEL SEMPERE PICO, FOUNDER AND DIRECTOR DSP HOMES "There may be a small correction, there may be a 10 percent correction, there may be even a 15 percent correction, but I think in comparison to how much prices have risen over the past 28 months, it's not necessarily a huge deal. Unless of course you bought a property right now and you have very little equity or very little money down, and you're going to be put into negative equity, but I think that's a very small portion of buyers."

Hong Kong's local government is in the middle of implementing cooling measures to slow the market as well. However much prices drop though, owning a place of your own is still an unlikely dream for many in the city.