J.P. Morgan released a research report stating that the surge in Hong Kong property stocks, which have climbed 11% year-to-date and outperformed the Hang Seng Index by 6%, may be driven by several brokerages raising their forecasts for Hong Kong's property price growth this year to 5%-10%.

J.P. Morgan indicated that, considering the share prices of many companies have reached or are near historical highs, it believes the market has already priced in a solid recovery for the Hong Kong property market over the next two years.

At this juncture, J.P. Morgan believes property rental stocks offer greater potential upside, as the improvement in their commercial property businesses has not yet been fully reflected in their share prices, with most still trading more than 30% below their peaks.

J.P. Morgan's top picks are Hang Lung Properties (00101) and Swire Properties (01972), due to the continuous improvement in the retail operations of these two stocks in Mainland China.

Wharf REIC (01997) could also become a dark horse if its management expresses a more positive outlook on tenant sales prospects during the earnings call in March this year.

Among developers, J.P. Morgan prefers Sino Land (00083) and Henderson Land (00012), but overall recommends waiting for a better entry point.