The curbs on residential real estate purchases could shift demand to retail and industrial spaces, diverting billions of dollars to those sectors as well as to housing markets in the United States, Canada, Australia and Malaysia.

Even if the pace of buying slows, analysts said, the appetite for homes in Hong Kong and Singapore is so strong that prices are expected to stay firm or ease only marginally.

"Singapore is like the London of Asia. Many people are not here to flip their properties or sell out in two to three years," said Knight Frank's head of consultancy and research Png Poh Soon. "There are lots of non-monetary reasons for buying Singapore and also Hong Kong property."

The two Asian cities are fierce rivals as financial and wealth centers but share the issues of strong demand, limited space and low mortgage rates that have driven housing prices beyond the reach of many locals.

Shallow capital markets, a cultural tendency towards property as an investment and concerns among mainland Chinese buyers about their home market have also played their parts.

After targeting speculators with previous steps, Singapore moved last week to discourage investors by slapping a stamp duty on locals buying a second home, an attempt to keep prices affordable for most first-time buyers.

In Singapore and Hong Kong, which brought in similar measures in October, both governments want to cool but not collapse the market and avoid driving investment elsewhere.

NEW STEPS IN HONG KONG

Hong Kong's embattled leader Leung Chun-ying announced in his maiden policy address on Wednesday a series of measures to increase land supply, as expected, though analysts said the moves would have little immediate price impact.

In power for less than a year, the former property surveyor is under mounting pressure to step down over an illegal construction scandal and is grappling to salvage his reputation and shore up his political future.

Leung shied away from further tightening while he gauges the impact of previous steps to rein in prices in one of the world's costliest property markets.

Those moves, including a 15 percent tax on foreign buyers, had a big impact on sales in November and December, when some agents reported a drop of more than 40 percent in transactions.

As Hong Kong felt the squeeze, private home sales in Singapore jumped nearly 30 percent in December from November.

Prices in Singapore rose 1.8 percent in the fourth quarter from the previous three months and have soared almost 60 percent to record highs since mid-2009 despite the government's repeated attempts to subdue them.

Hong Kong's transaction volumes have recovered in January and the duration of the measures' impact is getting shorter each time, said Wong Leung Sing of Centaline Property.

"It's like using a miracle drug," he said. "The first time it is very effective. The second time its effectiveness is largely decreased. The third time there might be no effect at all."

LOCAL DEMAND STILL STRONG

Hong Kong's government is ready to step in on the demand side if prices keep rising.

"Those demand-side measures will be largely focused on the two tax structures," said Andrew Lawrence, head of Hong Kong property research at Barclays Capital, referring to stamp duty and a levy on foreign buyers.

Already there is evidence of more Asians buying properties in Australia, the United States, Canada and Britain, he said.

Citigroup estimated 90 percent of recent transactions in Hong Kong were by people intending to live in the properties. That contrasts with 2010, when an estimated 50 percent were end-users, 20 percent speculators, 20 percent long-term investors and 10 percent non-local buyers.

The steps Singapore took on Friday included a higher stamp duty of 15 percent for foreign buyers, a new levy on sellers of industrial property and a limit on loan sizes.

Overseas buyers had already started to look away from Singapore after its previous round of cooling measures. As a percentage of home sales, buying by foreigners in Singapore dropped to just over 6 percent last year from 18 percent in 2011, Citigroup said in a report.

The bank said it expects "foreigner participation to moderate slightly" since the Singapore stamp duty was aligned with Hong Kong.

Despite the drop in foreign demand, private home sales in Singapore rose to 24,568 last year from 21,097 in 2011.

Investors who stop buying apartments and houses are almost certain to seek other assets.

Data from CBRE shows industrial properties in Singapore offer a net yield of 4.3 percent and prime retail properties offer 4.6 percent. Banks now pay around 0.1 percent interest on Singapore dollar savings accounts.

"One thing we can be sure of," said Joseph Tan, executive director of residential at CBRE. "Because interest rates are so low, the money will not be sitting in the bank for too long."

(Writing by John O'Callaghan in SINGAPORE; Additional reporting by Grace Li in HONG KONG; Editing by Daniel Magnowski)

• A Permanent Economic Emergency