Despite criticism about the effectiveness of the Hong Kong government's recent measures to ease some of the world's most expensive home prices, analysts tell CNBC that the government has no choice but to intervene.
The Hong Kong government pledged on Wednesday to bolster land supply and earmarked $580 million in the coming five years to seek out potential new areas for land reclamation in its annual budget to help ease the supply crunch.
But Nicole Wong, regional head of property research at CLSA said government efforts to boost supply will have a limited impact on reining in prices and the government should look more towards measures to curb demand.
"You can see the current government trying to sell land with a lot of effort, but it takes time," Wong said. "The only alternative would be to intervene on the demand side... So if the government doesn't intervene on the other side then the whole system collapses."
Last week, the government unveiled a slew of new property cooling measures like higher stamp duties and home loan curbs on transactions. The government has taken a series of steps to curb property prices since October 2009, but has continued to face criticism as prices have kept rising - up 2 percent in January and jumping 120 percent since 2008.
According to Wong, property restrictions are a more effective way to cool the market than releasing more land, which could take up three to four years before it comes to the market.
"It [the cooling measures] reduced non-urgent demand buyers - upgraders, because of the huge cost of stamp duty, a lot upgraders could reconsider," Wong said, anticipating a 10-15 percent drop in transaction activity since more tightening was introduced last Friday.
(Read more: Hong Kong Unveils More Property-Cooling Measures )
Raymond Yeung, senior economist, Greater China, ANZ backed that sentiment, saying the restrictive measures are reducing speculative activity in the market, and land reclamation by the government is a long-term measure.
"The number of apartments or land the government tried to sell or intended to put to the market at this stage will have very limited effect on the pricing expectation in the market," Yeung said.
Andrew Freris, chief investment advisor for Asia, BNP Paribas Wealth Management, however, said there's not much that the government can do in Hong Kong to control property prices, which is dependent on global factors.
"The awful thing is the housing policy of Hong Kong is run by [U.S. Federal Reserve Chief] Ben Bernanke," Freris said. "As long as Ben keeps interest rates zero, there's very little else they can do, unless they intervene really heavily."
Hong Kong, one of Asia's major financial centers, has been prone to hot money flows fueling its property markets as central banks around the world increase liquidity through monetary easing to boost growth.
(Slideshow: The World's Hottest Real Estate Markets )
Yeung adds that for house prices to go down in Hong Kong, the government needs to wait until the U.S. ends its easing cycle.
"The market will react to that when the interest rate expectation will change and local interest rates start to jump, then we'll see a correction in the housing market," Yeung said.
—By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter