Property-value Expectations Scaled Back

Source: China Daily

Shares of Hong Kong property developers may suffer from a slowdown in the local property market this year, but firms with a massive mainland presence could withstand the slowdown, Goldman Sachs said yesterday.

The investment bank slashed its forecast on the increase in Hong Kong's housing prices, saying they're more likely to go up 20 percent in the next two years, rather than 40 percent.

As a result, "the share prices of major developers could fall a further 10 to 20 percent before they find support", the bank said in a research report.

The report pointed out that most Hong Kong property stocks have shed between 10 and 24 percent of their value this year, which presents a bleak view in the property sector's outlook, as it is likely to trail the decline in the equity market.

The bank gave "neutral" ratings to Sun Hung Kai Properties, Henderson Land and Sino Land.

Citing a global economic downturn as a reason behind a slower Hong Kong property market, the bank said the problem might lead to companies slashing salaries for their staff, as well as diminish homebuyers' purchasing power.

The report noted that Hong Kong's residential property market has undergone rapid growth over the past year, attributed to a scarcity in new supply, low debt ratio and a mediocre speculative atmosphere. Still, the report warns that the growth momentum might slow down as a result of the faltering economy.

One company, Kerry Properties, was given a "buy" rating by Goldman Sachs, with a target price set at HK.50. The property firm was strengthened by its considerable amount of mainland business, which Goldman said could offset any negative impact in Hong Kong.

But Charles Chan, managing director of property valuation and professional services for Savills, said Goldman's entire report may be too pessimistic.

"The worsening US economy might induce more money to flow into Hong Kong, so I remain sanguine about local property stocks," he said.

Enlighten Securities and Futures Vice-President Ricky Cheung said the local property market is unlikely to plunge into a recession in the coming six months. "Factors such as the thriving mainland economy and a soft greenback will continue to fuel the property market growth," he said.

Cheung said New World Development and Hang Lung Properties would top their peers in terms of fourth-quarter earnings from last year, when the companies release those figures.

But he remains doubtful on the prospect of another local giant, Sun Hung Kai Properties, saying that its shares price may be haunted by the rumor that the Kowk brothers are at odds.  (By Hui Ching-hoo)

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Editor: Jessie Hwang