The city has a population of 800,000 and serves as the hub of the San Francisco Bay Area, which has nearly 7 million people.

But, as with many other cities in the US and elsewhere, housing prices in San Francisco have softened in the wake of the economic fallout that began on Wall Street in September.

DataQuick Information Systems, which monitors real estate activity in the United States, reported that the median price of new/resale homes/condos in San Francisco fell from US$731,000 in December 2007 to US$616,500 last December, down 15.7 per cent.

Sales volume decreased to 366 units from 445 over the same period.

Hong Kong investors purchase residential property in San Francisco for a variety of reasons. They may want a second or third home, a place for their children to live while they are studying in the US or an investment property with rental potential.

The downward price trend has convinced some investors to adopt a wait-and-see attitude.

Alexis Wong, president and chief executive of AGI Capital Group, a San Francisco-based real estate development and investment company, said: 'Foreign investors are playing it safe, but three to six months from now we think interest will pick up.'

The most popular neighbourhoods for Hong Kong investors include high-end properties in South of Market, Pacific Heights and Russian Hill, and medium-priced units in Sunset and Richmond.

South of Market, a trendy area within walking distance of the city's Financial District, features an eclectic mix of warehouses, technology companies, nightclubs, restaurants and hotels, and has more than 60 condo towers.

Several condo towers have cut prices by 5 to 35 per cent recently to attract buyers.

The 60-storey luxury Millennium Tower, due to open in April and the centrepiece of South of Market at 301 Mission Street, recently cut prices on all 419 of its units by 15 per cent. The adjustment also covers buyers who were already under contract.

The discount means prices now range from US$570,000 for a one-bedroom, one-bath unit of just under 700 sqft to US$10.3 million for a 5,555 sqft raw space penthouse.

Millennium Partners managing director Richard Baumert said, 'This is a reflection of the market.'

Pacific Heights, an affluent neighbourhood of condos and single family homes, offers scenic vistas of the Golden Gate Bridge and San Francisco Bay.

McGuire Real Estate agent and PulseFactors.com founder Malcolm Kaufman said a 1,800-2,000 sqft, three-bedroom, two-bath condo in Pacific Heights could sell for about US$2 million and rent for US$5,000 to US$6,000 per month.

Richmond and nearby Sunset (on the south side of Golden Gate Park) have significant Asian populations. They are often referred to as 'The Avenues' because of the number of north-south avenues that pass through them. Single family homes are more typical in both districts.

Mr Kaufman said that a 1,300 sqft two-bedroom, one-bath condo in Inner Richmond might go for US$819,000 to US$890,000, with rent at US$2,500 to US$3,000 per month.

He estimated that overall rental prices in San Francisco had risen by 5 to 6 per cent a year since 2000.

Ms Wong said rental prices had strengthened in the past year due to inflation and the sudden increase in available tenants.

'Those who would have bought have become tenants,' she said, adding that rentals were also stabilising as homebuilders converted their unsold condos into rental units, thus increasing inventory.

Using PulseFactors figures, which are based on SFAR's data, a quick overview of average condo prices over the years shows that a one-bedroom, one-bath unit (800 sqft) priced at US$430,000 in 2000 rose to US$593,000 in 2007, up 37.9 per cent, before dropping back to US$590,000 last year.

An average three-bedroom, two-bath unit (1,575 sqft) that sold for US$725,000 in 2000 was worth US$1.09 million in 2007, up 50.6 per cent. That price fell to US$1.06 million last year.

Hong Kong investors tend to keep their properties for the long term (five to 10 years) so many realtors see the present price weakness as offering a gilded buying opportunity.

Mr Kaufman said: 'San Francisco is a city with limited space, it's the jewel of the country. We get 16 million people a year and everyone who comes here likes it.

'We are ringed by Silicon Valley and have a diverse economy,' he said. 'We will probably be the last into the recession and one of the first out of it.'