CLSA has released a research report stating that Hong Kong property prices are showing signs of recovery, with some new project sales receiving enthusiastic responses and optimistic market sentiment, which has also driven up developer stock prices year-to-date. The firm predicts the upward trend in property prices will continue; however, due to diminished expectations for interest rate cuts and the resilience of Hong Kong mortgage rates, the price increases are expected to be moderate.
Historical experience suggests that when property price growth slows or market sentiment peaks, property stocks often undergo a correction. The report highlighted that Sun Hung Kai Properties' (00016) second-round sales for Phase 2A of Sierra Sea received over 49,000 applications, representing an oversubscription rate of more than 214 times. The average price per square foot for this batch of units was approximately HK$10,968, which is 5.5% and 3.1% higher than the prices for Phase 1A and Phase 1B launched in April and May last year, respectively.
Nevertheless, this price increase is lower than the 6.8% rise in the broader market over the same period, and also falls short of the 29% price hike seen for units in the same developer's "Cullinan Sky II" project. Additionally, following rumors that Marriott International might acquire Rosewood Hotel Group from Chow Tai Fook Enterprises, CLSA pointed out that Rosewood Hotel Group is a sister company of New World Development (00017).
Therefore, even if the transaction is finalized, CLSA believes Chow Tai Fook Enterprises would not use the proceeds to repay New World's debts. CLSA maintains its forecast for a 5% growth in Hong Kong property prices by 2026. Its top stock picks are HYSAN DEV (00014) and LINK REIT (00823), both rated "Outperform".
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